Mumbai, Oct 4 : IIFL Asset Management Ltd (AMC) has said that it has initiated an internal inquiry after the SEBI barred a dealer with the company from the securities market for front-running the trades of six funds managed by India Infoline Wealth (IIFL Wealth) using ‘mule’ accounts.
Five other individuals have also been barred by the securities market regulator in the matter.
Front-running refers to buying or selling securities ahead of a major transaction so as to benefit from the subsequent price move. This denotes persons dealing in the market, knowing that a large transaction will take place in the near future and that parties are likely to move in their favour.
In a regulatory filing on Sunday, IIFL Wealth said that IIFL AMC, its wholly-owned subsidiary, has taken immediate and serious note of the SEBI findings and its action against its employee Santosh B. Singh, a dealer.
“IIFL AMC has initiated an internal inquiry into the conduct and functioning of this employee, taking into account the information and findings of the SEBI,” it said.
The asset management company has also instructed Singh to fully cooperate in the inquiry as well as the SEBI investigations and provide all requisite information, as per the filing.
It further said that IIFL AMC has in place necessary systems, processes and controls as per regulatory requirements including risk management systems, code of conduct among others.
“We have taken serious note of SEBI Order and finding and have initiated immediate internal review and further strengthening of system, processes and controls,” it said.
It also said that IIFL AMC will ensure extending full co-operation to the regulator in its investigation and will further update SEBI on its findings and review.
In an order dated October 1, the Securities and Exchange Board of India (SEBI) barred Singh, along with five others from any transactions in the securities market for front running the trade of six funds managed by India Infoline Wealth (IIFL Wealth) using ‘mule’ accounts.
The market regulator conducted a preliminary examination for the period of December 1, 2019 to August 10, 2020, and found that IIFL Asset Management Ltd, 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 were placing orders through the IIFL employee or dealer.
Singh was found to be connected with certain entities, who were prima facie observed to have traded depending on the impending orders of the funds concerned, as per the interim order.
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