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Violation of ethics among Axis charges for dismissing top dealer Joshi

Documents accessed by Mint suggest that Viresh Joshi was sacked on multiple grounds including violation of the company’s code of conduct and ethics.Premium
Documents accessed by Mint suggest that Viresh Joshi was sacked on multiple grounds including violation of the company’s code of conduct and ethics.

  • The fund house has refrained from leveling an allegation of front running against the former fund manager.
  • The matter is being investigated by three outside firms Alvarez and Marsal, law firm AZB and auditor Deloitte.

For the firing of a top dealer, Axis Mutual Fund’s press statement on the dismissal of Viresh Joshi last month was sketchy on details, merely referring to his “conduct" and an “ongoing investigation". However, the fund house was more forthright in Joshi’s termination letter, citing multiple grounds, including violations of the company’s code of conduct and ethics.

Axis Mutual Fund, India’s fifth-largest fund house by assets, dismissed Joshi, the head dealer and fund manager of five schemes, on 18 May. According to his termination letter, reviewed by Mint, Joshi was unwilling to cooperate with the company’s investigation and explain the source of his income and assets, made incorrect allegations of coercion, and could not explain a whistleblower’s email accusing him of front-running. The letter also conveyed Axis Mutual Fund’s belief that he broke securities law.

“Post these investigations, Axis Mutual Fund will pursue legal and other remedies," a person with direct knowledge of the matter said on condition of anonymity.

“We are not in a position to comment on any other matters/questions as set out in your email at this stage. However, we can confirm that: (i) the internal investigation is still ongoing, and we continue to work and cooperate with regulatory authorities in this regard; and (ii) employment action taken by us is based on our investigation and its findings, and we will take all necessary legal steps to protect our interests," a spokesperson for Axis Mutual Fund said in an emailed statement in response to a query.

The termination letter, however, does not accuse Joshi of front running, a matter being investigated by three outside firms—consultant Alvarez and Marsal, law firm AZB and auditor Deloitte.

“You have been unable to provide requisite explanations and documents and, in fact, provided false and misleading information to the company. Accordingly, the company has lost confidence in you," the letter said.

One key allegation levelled in the termination notice is Joshi’s unwillingness to explain the income source for his assets.

“Unwillingness to explain the source or provide any supporting (documents) for the responses provided by you as the source of income for assets which are grossly disproportionate to your known sources of income with the intent of proving that the same has not been acquired through illegal activities conducted by you as dealer and fund manager of the company," Axis Mutual Fund said in the termination note.

Joshi’s lawyer Chirag M. Shah said the grounds of termination comprise “grandiose and bombastic terms but little else". “Such serious charges are being made in the most callous manner without any shred of evidence. With regards to the code of conduct and violations thereof, I repeat, the allegation is vague since there is no specific charge made out, “ Shah said in a statement on behalf of his client.

In all public communication so far, Axis Mutual Fund has attributed the dismissal to an ongoing suo-moto investigation. However, according to the termination notice and Joshi’s legal notice to the fund house, the genesis of the probe lies in an anonymous email sent in January this year, accusing him of front-running.

Front-running is a type of malpractice where a dealer, trader or fund manager aware of a large upcoming share purchase order buys the same share in advance, hoping to benefit from the deal done on behalf of clients. Such bulk orders drive up share prices.

Axis Mutual Fund further alleged that Joshi repeatedly gave false statements to the investigating team orally and in writing.

Meanwhile, in his legal notice to Axis Mutual Fund on 20 May, Joshi has accused his former employer of ignoring his alerts. “We hereby record that our client (Joshi) has on several occasions vide internal communications raised concerns about the spikes in the trade noticed by him," Mansukhlal Hiralal & Co. said in its legal notice sent to Axis Mutual Fund, referring to trades between April 2020 and May 2022. Joshi claims such trading volume spikes happened in the market prior to the execution of Axis MF’s orders.

“While we cannot comment on matters concerning the ongoing investigation, any statement that refers to Mr Joshi highlighting any specific instances of securities law violations (as referred in your email below) with our management is factually incorrect and is denied," Axis Mutual Fund said in the email statement.

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