 "Insider trading on L&T: Who is controversial hedge fund manager Barun Agarwal?")
While Sebi has widened the scope of its probe to 70 firms in connection with alleged insider trading on the stocks of L&T Finance, the man at the centre of the scandal is a little known hedge fund manager from Hong Kong whose star has been on the rise over the last two years.
The Hong Kong-based hedge fund Factorial, has been at the centre of insider trading allegations with Sebi passing an interim order barring it from Indian markets.
Factorial, which is a pan-Asia hedge fund which was started by Indian fund manager Barun Agarwal, is accused of getting insider information from Credit Suisse, the broker for the company, about theshare sale price of L&T Finance.
Agarwal’s hedge fund is accused of making a profit of Rs 20 crore by aggressively taking short positions on the L&T Finance shares based on inside information on the stock price and has been restrained from accessingIndianmarkets, directly or indirectly, till further orders.The fund has been asked to file its reply, if any, toSebi within 21 days but has denied any wrongdoing.
A graduate of the Indian Statistical Institute,Agarwal started his career handling fixed income and money market assets for ICICI Bank and later moved to theequity research department at Solomon Smith Barney, according to this report.
He then moved to co-head the derivatives division atJP Morgan Chase & Co before a 8 year stint at hedge fundDKR Oasis from 2004, where he worked alongsidestar manager Seth Fischer, who at one point handled $3.3 billion for DKR Soundshore Oasis Fund.
In 2012, Agarwal formed Factorial and as this detailed profile of him on Business Standard notes, the hedge fund has been doing better than some of its better known competitors and had recorded annualised returns of 14 per cent. The report noted that the fund’s size had also increased from handling assets worth $25 million to around $100 million over the last two years.
While Agarwal has presently chosen to stay away from commenting on the matter, his firm’s alleged involvement in the scandal only further raises the question of insider trading in Indian markets and the market regulator’s inability to curb it.
Experts have constantly said that Sebi has been largely been unable to tackle insider trading, leave alone prosecute those guilty of it. Brokers have said there are many instances of fund managers, merchant bankers passing on information to market operators, in return for a cut of the profits earned from the front running.
While it now has powers to search and seize data in such cases, Sebi hasn’t used them extensively yet, and Factorial could well be a test case for the market regulator’s intent in cases of insider trading.