Sebi bans mom-son duo from market in front running case

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In a case of front running in the stock market, the capital markets regulator, Sebi, has barred a mother son duo form the markets.  While, the son (Rahul Mankotia) has been barred for  front-running, his mother has been barred for allowing Mankotia to carry out the fraudulent activity from her own demat account and she didn’t raise any objection.  The market watchdog has  banned both Mankotia and his  mother  from trading for next three years and asked them to pay a penalty of Rs 77 lakh within next 45 days.

What is front running?

It is a process where an entity gets access to inside information about a company before its out in the public domain.

Here, in this case, the son (Rahul Mankotia) was an employee of alcoholic beverage manufacturing company, Radico Khaitan Limited’s one of the distillers, Radico NV Distilleries. Mankotia was sent on deputation as a technical stock analyst to RKL’s promoter company,  Sapphire Intrex Ltd. There he worked as a technical stock analyst. Sapphire holds 33.95 per cent stake in RKL. While, working on deputation in Sapphire, he gained access to impending trade orders of the company.  Based on this information, Mankotia, placed trades in the NSE. But he didn’t use his own demat account to place those trades.  Rather, he used his mother’s account to serve the purpose. This is where his mother also got entrangled in this whole fiasco. Although, she didn’t place any trades herself, but, because, she allowed her son to use her demat account for front running and because she didn’t raise any objections, under Sebi’s Prohibition of Fraudulent and Unfair Trade Practices (PFUTP Regulations) this is a malpractice. So,  she also got penalised.

Sebi came to this conclusion after it investigated trading activities of both Mankotia and his mother during the period from July 2021 to June 2022. The penalty of Rs 77 lakh will be deposited into the Investor Protection and Education Fund (IPEF).