The Securities and Exchange Board of India (Sebi) has issued a show cause notice to six foreign portfolio investors (FPIs) run by US-based asset manager Capital Group for alleged lapses in maintaining confidentiality of trade-related information. This marks the first time Capital Group has been identified in a Sebi notice in the front-running episode, having previously been described only as a "big client." The regulator has initiated legal proceedings against Smallcap World Fund, American Funds Insurance Series Growth-Income Fund, American Funds Fundamental Investors, The Growth Fund of America, AMCAP Fund and Capital Group AMCAP Fund (Lux) as per the 17-page, February 2 notice reviewed by ET. Capital Group manages over $3.3 trillion in assets globally, making it one of the largest asset managers in the space. A Capital spokesperson declined to comment, while Sebi didn't respond to queries regarding the matter.
Sebi's investigation covers the period from January 1, 2021, to June 20, 2023, during which it detected the leaking of non-public, sensitive information related to impending, large trading orders of Capital Group. The regulator's investigation revealed that two Capital traders - James Vincent Cheng and Terence Tsai, who handled about 90% of the firm's India-related trading activity - shared information regarding impending trades with Singapore-based trader Rohit Salgaocar. According to Sebi's findings, prior to the placement of large buy or sell orders in the secondary market on behalf of Capital Group, the details of these impending trades - including the specific scrip name, price and exact quantity - were systematically shared by traders of Capital Group with Salgaocar, who is director of Strait Crossing Pte Ltd, an unregistered entity in India. Sebi had banned Salgaocar in January 2025 over the front-running matter, in which he and Parekh were said to be involved.
The regulator's probe further revealed that Salgaocar subsequently relayed this sensitive, non-public trade data to market operator Ketan Parekh and his associated network of information-based front-runners. As per Sebi's show cause notice, "Rohit Salgaocar connived with Ketan Parekh and communicated to him the non-public information with respect to the large order of the six FPIs under Capital Group." Ketan Parekh used the information provided by Rohit Salgaocar to take positions in the scrips prior to the orders of the Capital Group, using various trading accounts. Sebi's investigation covered various communications, including analysis of Bloomberg chat logs and WhatsApp communications to arrive at its findings. The regulator's primary allegation against Capital Group is that it failed to maintain absolute confidentiality regarding trading intentions and parameters, allowing internal trade secrets to be leaked to unauthorised third parties.
The Securities and Exchange Board of India (Sebi) has issued informal guidance allowing clients under the non-discretionary portfolio management services (ND-PMS) framework to pledge securities held in their demat accounts. According to reports from The Economic Times and The Financial Express, this clarification came through a guidance letter issued to Geojit Financial Services Limited in response to queries regarding the permissibility of pledging securities purchased under the ND-PMS framework. The guidance was issued through an informal guidance letter dated May 18, 2026, in response to Geojit's request for interpretation on whether securities purchased under ND-PMS framework could be pledged either directly by the client or through instructions routed via the portfolio manager to the custodian.
The clarification is expected to provide operational flexibility for portfolio managers and clients using ND-PMS structures, particularly high-net-worth investors seeking liquidity against their investment portfolios without liquidating holdings. As reported by The Financial Express, Sebi noted that the guidance was issued based on the facts presented in the application and does not constitute a formal board decision or override any other applicable legal or regulatory requirements. The regulator further clarified that "Since the pledged securities remain with the client, the market value of securities pledged by the client shall continue to be included in the Portfolio Manager's Asset Under Management until the invocation of pledge and reflected in the regulatory reporting." The Capital Group case represents a significant enforcement action, marking the first time the asset manager has been specifically named in a Sebi front-running investigation, highlighting the regulator's continued focus on maintaining market integrity and protecting institutional investors from insider trading activities.
