Front running is basically trading of the stock or any other financial asset by an intermediary (broker) who already has advance knowledge of future transaction that is bound to affect the price of that stock or financial asset.
Here the basic point is that brokers should not use the private information which they have regarding future transactions for their own personal advantage. Various judicial decisions have now included private individuals equally liable for prosecution at par with the intermediaries. Any gains on account of these transactions are illegal in Indian law and bound to attract punishment.
This practice if allowed uncheck disturbs the level playing field and is against the principle of a fair business practice. In India Securities and Exchange Board of India (SEBI) has been authorized to investigate these offences and impose penalties on persons violating the law. Any dispute arising out of the orders passed by SEBI can be challenged by individuals in the Securities Appellate Tribunal (SAT).
