The Securities and Exchange Board of India (SEBI) has issued show-cause notices to six foreign portfolio investors (FPIs) linked to US-based asset manager Capital Group in connection with its ongoing front-running investigation, according to people familiar with the matter.
The entities that have received the notices are American Funds Insurance Series Growth-Income Fund, American Funds Fundamental Investors, Smallcap World Fund,The Growth Fund of America, AMCAP Fund and Capital Group AMCAP Fund (Lux), they said.
Capital Group declined to comment due to the ongoing nature of the matter. SEBI did not respond to the queries until press time.
Regulatory probe
The proceedings stem from SEBI’s interim order issued in 2025 against Singapore-based trader Rohit Salgaocar and Ketan Parekh, in which the regulator alleged that confidential information relating to trades by a “big client” was used for front-run trades in the market. SEBI had not identified Capital Group in the interim order
The regulator alleged that Salgaocar, a director at Strait Crossing, received information relating to impending trades from two traders linked to Capital Group, and shared it further with a network of traders linked to market operator Ketan Parekh. Salgoacar was in a referral agreement with Indian intermediaries Motilal Oswal Financial Services and Nuvama Wealth Management to refer trades of the client to them.
Salgoacar has appealed against SEBI’s interim order and is being heard before the Securities Appellate Tribunal (SAT). In November last year, SAT allowed Rohit Salgaocar’s plea seeking cross-examination of Ketan Parekh and directed SEBI to provide a date for the process.
“The matter will be closely watched by institutional investors and intermediaries as it could lead to closer scrutiny of internal controls and information-sharing practices followed during large institutional trades, particularly between intermediaries,” said a securities lawyer, wishing not to be named.
Another person said the case could further shape regulations around communication protocols and access to trade-related information within institutional dealing operations.