IIFL Wealth suspends ‘frontrunner’ Santhosh Singh; initiates inquiry

Our Bureau | Updated on October 05, 2020 Published on October 05, 2020

SEBI found frontrunning by IIFL staff, 5 others through mule accounts

Chennai, October 5

IIFL AMC has suspended its dealer Santosh Brijraj Singh after the Securities and Exchange Board of India (SEBI) last week barred him and five associates from stock market transactions till further notice, for frontrunning trades.

“Keeping in view the order and seriousness of the finding, IIFL AMC has suspended the services of the above employee (Santhosh Singh) with immediate effect, vide its letter dated October 4, 2020,” it said in a clarification notice to the stock exchanges.

IIFL AMC has initiated an internal inquiry into the conduct and functioning of the employee, taking into account the information and findings of SEBI.

SEBI order

Last week, SEBI had come out with a detailed report on the frontrunning case that took place through the IIFL dealer.

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The IIFL Group’s mutual fund schemes, portfolio management services and alternative investment funds were placing orders through IIFL dealer Santosh Singh.

Singh and Adil Gulam Suthar, a former sub-broker of Angel Broking, are alleged to be the main brains behind the frontrunning operation, run through four entities — Virendra Pratap Singh, Neha Virendra Singh, Gulammohammed Gulamabbas Shaikh and Mohammedidrish A Shaikh — who were placing orders based on the impending orders of these funds, a SEBI investigation has revealed.

Subsequently, these entities squared off their positions when the orders of these funds were placed in the market. “Thus, they were able to generate substantial proceeds for themselves by placing orders in anticipation of the price movement of scrips on account of large buy/ sell orders,” SEBI observed.

According to the market regulator, Singh and Suthar were found to have made around ₹58 lakh through these trades.

“The proceeds of the ‘front run’ trades were, on a regular basis, withdrawn from the linked bank accounts in cash, via ATM, by entities who, prima facie, were not the holders of the said bank accounts,” the SEBI order said.

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In its order, SEBI has referred to the entities other than Singh and Suthar as ‘mule’ account holders — entities that are directly/ indirectly recruited/ employed by the masterminds of the frontrunning operation.

The regulator said that using a mule account not only helped Singh put multiple layers between him and the frontrunning trades but also hid him from audit trail.

The four mule account holders showed their annual income ranging between ₹1-5 lakh, but the SEBI probe found that between December 2019 and August 2020, the gross value of trades done by these entities stood at between ₹22-40 crore.

The bank accounts of Singh and Suthar have been impounded by SEBI and the duo have been directed to open an escrow account with a nationalised bank and deposit in it ₹58.10 lakh obtained from frontrunning trades.

SEBI has directed that the bank accounts and demat accounts of all six entities — Singh, Suthar, Virendra Pratap Singh, Neha Virendra Singh, Gulammohammed Gulamabbas Shaikh and Mohammedidrish A Shaikh — be frozen.

IIFL AMC has also instructed Santosh Singh to fully co-operate in the inquiry as well as SEBI investigation and provide all requisite information.

IIFL to strengthen system

“IIFL AMC has in place necessary systems, processes and controls as per regulatory requirements including risk management systems, code of conduct, etc. We have taken serious note of the SEBI order and finding and have initiated immediate internal review and further strengthening of the system, processes and controls,” the wealth management company further said.

IIFL AMC said it will ensure extending full co-operation to SEBI in its investigation and will further update SEBI on its findings and review.

Shares of IIFL Wealth Management slipped 2.89 per cent at ₹960 on the BSE.

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Published on October 05, 2020
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