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Sebi Bans 6 Persons from Securities Markets in IIFL Group Front Running Case


Markets regulator Sebi on Friday barred six persons from the securities market for up to five years for front running the trades of India Infoline Group (IIFL Group). In this case, a dealer of India Infoline Group and his connected entities had used “mule” accounts.

In its order, Sebi has barred Santosh Brijraj Singh, who was a dealer of IIFL Group entity and Adil Gulam Suthar from the market for five years, while it prohibited mule account holders — Virendra Pratap Singh, Neha Virendra Singh, Gulammohammed Gulamabbas Shaikh and Mohammedidrish A Shaikh for two years.

Also, these persons have been restrained from holding the post of director, any managerial position or associating themselves in any capacity with any listed public company. In addition, Sebi levied a penalty of Rs 10 lakh on Santosh Briraj Singh and Rs 8 lakh on Adil Gulam Suthar.

Sebi noted that these persons were front running the trades of six entities of IIFL Group, including IIFL Asset Management, also called Big ‘Clients’. The regulator found that Santosh Brijraj Singh after becoming privy to the non-public information of the impending orders of the big clients, communicated the same, directly or indirectly, to his connected entity Adil Gulam Suthar.

Subsequently, both of them used the mule account sets to carry out the front running trades. They had earned significant profits while front running the trades. It further noted that Santosh B Singh and Adil Gulam Suthar placed orders from the trading accounts of the mule account holders — Virendra Pratap Singh, Neha Virendra Singh, Gulammohammed Gulamabbas Shaikh and Mohammedidrish A Shaikh.

The regulator found that Santosh Brijraj Singh and Adil Gulam Suthar with the help and cooperation of Virendra Pratap Singh, Neha Virendra Singh, Gulammohammed Gulamabbas Shaikh and Mohammedidrish A Shaikh employed a pre-determined scheme to front-run the impending orders of the big clients. Pursuant to the scheme, they have front-run the orders of the big clients on multiple occasions during the investigation period and have made considerable wrongful gains. “Noticees No 5 and 6 (Santosh Brijraj Singh and Adil Gulam Suthar) who have opened, operated, managed and controlled the accounts of the Noticees No 1 to 4 (other four persons) and sometimes they used to get monetary assistance from Noticees No 5 and 6. It was also unearthed that Noticees No 1 to 4 were poor and not literate persons and were managing their lives with difficulties,” Sebi said in an order.

The regulator noted that the trading pattern showed the deployment of BBS (Buy-Buy-Sell) or SSB (Sell-Sell-Buy) strategies. These are two typical modes of front running under which front runners place buy or sell orders just before the final buy or sell order of the big client and then place sell or buy orders, respectively, after the price of the stock has risen or fallen following the execution of the final order by the client.

Earlier in October 2020, the regulator, through an interim order, had barred these six individuals from the capital market till further directions. Following Sebi’s order, IIFL Asset Management Company suspended the services of its employee Santosh B Singh.

The order came after the Securities and Exchange Board of India (Sebi) based on a surveillance alert initiated a preliminary examination in the present matter against Virendra Pratap Singh and Neha Virendra Singh, who were suspected to be front running the trades of India Infoline Asset Management Ltd.

Recently, as part of its ongoing probe into a front-running case at Axis Mutual Fund, the Securities and Exchange Board of India (Sebi) carried out search and seizure operations on 16 suspected entities at over 30 locations in Maharashtra and Gujarat over the past few weeks.

Axis Mutual Fund has sacked two fund managers, Viresh Joshi and Deepak Agarwal, on alleged charges of misconduct, without disclosing details. Joshi has sent a legal notice to the fund house alleging wrongful termination.

(With inputs from PTI)

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