The Securities and Exchange Board of India has issued show-cause notices to six Capital Group-linked foreign portfolio investors in India, according to reports from The Economic Times. This marks the first time the US-based investment firm has been directly named in connection with the front-running case. The regulator is investigating alleged trades by Capital Group entities in the local stock market that were flagged in the early 2025 front-running case involving Ketan Parekh and Rohit Salgaocar. The 17-page show-cause notice dated February 2 specifically targets the entities as Capital Group's alleged conduits for leaking confidential trade information. As per The Economic Times, this is the first time Capital Group has been identified in a SEBI notice linked to the front-running case, after previously being referred to only as a 'big client'. The action represents a significant escalation in SEBI's investigation into the alleged trading network, with the six FPIs now having an opportunity to respond to the allegations before SEBI decides on any further action.
SEBI's investigation covers Capital Group's trades in India between January 1, 2021, and June 20, 2023, as detailed in the latest regulatory notice. During this period, the regulator detected a leak of information to Parekh and Salgaocar. The show-cause notices specifically seek information about Capital Group's alleged inability to maintain confidentiality of their trades in India, forming the basis of SEBI's 188-page interim order that named the two individuals as chief architects of the front-running scheme. The regulator alleged that confidential information relating to large impending trades executed on behalf of Capital Group entities was shared with unauthorised individuals before orders were placed in the market. According to The Economic Times, SEBI found alleged leaks of non-public and sensitive information related to large trading orders placed by Capital Group entities during this period. The investigation reveals that sensitive trade-related information may have been improperly shared by two traders associated with the FPIs, allowing the network to allegedly place trades ahead of large institutional transactions and make illegal profits.
SEBI's investigation identified James Vincent Cheng and Terence Tsai as key individuals in the matter, according to the latest regulatory findings. As per The Economic Times, these two traders handled nearly 90% of Capital Group's India-related trading activity and allegedly shared information regarding upcoming buy and sell orders with Rohit Salgaocar before execution. The regulator alleged that details including stock names, prices, quantities, and trade prices were systematically communicated ahead of large market transactions. Salgaocar is a director at Strait Crossing Pte Ltd, which SEBI described as an unregistered entity in India. SEBI's investigation revealed that 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. The regulator's findings were supported through examination of Bloomberg chat records and WhatsApp communications. According to The Economic Times, SEBI examined Bloomberg chat logs and WhatsApp communications during the probe to establish the communication patterns between the parties. The case has once again brought attention to Ketan Parekh, who was one of the most controversial figures in India's stock market history after being linked to the 2001 securities scam.
Salgaocar has appealed the interim order in a Mumbai court in November, with the outcome of the case currently pending. The case involves major Indian companies, as Capital Group, which manages over $3.3 trillion in assets globally, has a long history of investments in India, including ownership in several firms such as Bharti Airtel Ltd. and Maruti Suzuki India Ltd.. SEBI had already barred Salgaocar from the securities market in January 2025 in connection with the same front-running matter. Ketan Parekh has previously faced allegations linked to stock market manipulation and bank fraud associated with the 2001 market crash and alleged pump-and-dump activities. SEBI had banned Salgaocar in January 2025 over the front-running matter, in which he and Parekh were said to be involved. "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," SEBI said in the show cause notice. "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." Capital Group declined to comment on the matter, while SEBI did not respond to queries regarding the latest proceedings. As per The Economic Times, SEBI initiated legal proceedings against six FPIs - 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).
