New Delhi: Sebi barred Friday six persons from the securities market for up to five years for front running the trades of India Infoline (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 and Rs 8 lakh on 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 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 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.
Sebi further noted that Santosh and Suthar placed orders from the trading accounts of the mule account holders – Virendra, Neha, Gulammohammed and Shaikh.
The regulator found that Santosh and Suthar with the help and cooperation of Virendra, Neha, Gulammohammed and 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.
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.