SEBI bans former IIFL dealer for five years for front running activities

The final investigations in the IIFL front-running matter are over with the capital market regulator banning the group's former equity dealer from the securities market for a period of five years. 

According to the Securities and Exchange Board of India (SEBI), Santosh Brijraj Singh - who was the dealer for IIFL Asset Management, IIFL Select Series II, IIFL Multi-Strategy Fund, IIFL Long Term Growth Fund I, IIFL Focused Equity Strategies Fund - Capmetrics Investment Adviser and IIFL Special Opportunities Fund Series 5 - executed "front running trades" while passing information to his friend - Adil Gulam Suthar - who was formerly a sub broker with Angel Broking. 

While the regulator has banned both Singh and Suthar for five years from the securities market, they have also been barred from being associated with any SEBI-registered intermediary. 

Further, the duo has been barred from being associated with any listed company or any other company that intends to raise money from the public. Singh and Suthar have also been imposed a monetary penalty of Rs 10 lakh and Rs 8 lakh respectively. 

The regulator has barred four other individuals as well for a period of two years for lending their accounts - mule accounts, in technical parlance - for alleged front-running by Singh and Suthar. 

"On an analysis of KYC documents, bank account statements and submissions made at the time of statement recording… it was observed that Noticee No. 5 (Singh) was controlling and operating the trading accounts of Noticees No. 1 and 2 while Noticee No. 6 (Suthar) was controlling and operating the trading accounts of Noticees No. 3 and 4," stated the order while referring to the four other individuals. 

"… there is no room left for doubt that Noticees No. 1 and 2, had lent their trading and bank accounts to Noticee No. 5 which practically resulted in handing over the ownership and custody of securities and funds… to a third party… who having employed his own resources in the form of his market knowledge and money engaged in front running trades," said the SEBI order. 

"This devious practice of Noticees No. 1 and 2 facilitated Noticee No. 5 in executing the front running trades whilst concealing his identity… The consequence of such dubious practice adopted by Noticees No. 1, 2 and 5, facilitated the aforesaid fraud in a camouflaged manner that was so designed to evade detection," it added. 

Therefore, such practices of lending trading and bank accounts to abate fraudulent trading activities need to be strongly curbed in order to prevent market fraud, stated the SEBI order.

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