MUMBAI: In April this year, as a Mumbai-based employee of a firm responsible for trading on behalf of a Foreign Portfolio investor ( FPI ) walked out of the office building to a nearby tea stall, he barely noticed the two unknown faces smoking near the nondescript shop.As he always did, the employee borrowed the hand-phone of the tea-stall owner and dialed a New Delhi number. For the two unknown faces— working with a corporate forensic team of a multinational-- it had taken almost a month to figure out whether and how someone was front-running stock market orders placed by the FPI.“We had checked the cell-phone records of all employees but couldn’t find anything. Just before he (the accused) would punch in a huge buy or sell order of the FPI, he would call his stock broker in New Delhi, who would take decisions accordingly,” said a forensic investigator involved in the inquiry. FPIs that were only concerned about taxation in India until about a few months ago have now woken up to front-running by their employees, or employees of brokers they engage. Many FPIs have been hiring forensic investigators to discover whether their employees or brokers are front-running or manipulating stock markets in any way.“Although always cognizant of the risks of market manipulation and abuse, many FPIs are now roping in forensic experts to have their trading frameworks and structures reviewed to identify any fraud risks,” said Samir Paranjpe, partner, Grant Thornton. At least four FPIs have roped in investigators to conduct "forensic health check-ups" of their employees in last few months.Often, the guilty employees indulge in front running—basically buying or selling shares just in time before the FPI or the bank did so. They do make handsome profits, since share prices may be affected due to a bulk buy or sell order by the institutional investor. Industry trackers say that some of the Indian private banks too have been roping in investigators for the same purpose.In February this year, one of the top Indian private banks that had roped in an investigator discovered that one of their employees may have been involved in wrong doing. “While the employee didn’t even have a demat account, his mother-in-law seemed to be an active trader. The data analysis showed that there were strong correlations between the stock market positions of the bank’s treasury department and the stock buying pattern of the employee’s mother-in-law,” said another investigator involved in the probe."In our experience, front-running is a concern not limited to just FPIs but extends to even banks and brokerage houses. Today, financial institutions want to manage this risk proactively and have approached us to apply data analytics to identify ‘red flags’ and in many instances, we have used big data or forensic analytics to check if there have been spikes in particular small trades before the FPI, bank or brokerage house buys or sells shares,” said KV Karthik, Partner - Forensic, Financial Advisory, Deloitte India.FPIs, banks and brokerage houses have been roping in forensic investigators from Grant Thornton, Deloitte, EY, PwC and KPMG in last couple of months, say industry trackers. Basic rules such as not using cell phones inside the trading room, disclosing investments, and only using company phones have been in place for a while, but some employees found a way around them, say investigators. Apart from using big data tools, investigators are also scrutinising the family details of the employees.