Equity trading: SECP files criminal complaint against 2 individuals on charges of front-running

The Securities & Exchange Commission of Pakistan (SECP) has filed a criminal complaint against two individuals who were found involved in front-running equity trading by a large institutional investor, a statement said on Wednesday.

According to details, the complaint was filed based on an investigation conducted under the Securities Act, 2015.

The two individuals the SECP did not name in its statement were found involved in front-running equity trading by a large institutional investor during the period from October 1, 2021, to December 31, 2021.

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The criminal complaint number 15 of 2024, dated April 8, 2024, has been filed at the Special Court (Offenses in Banks), Karachi, SECP said.

“The analysis of order-level data by SECP investigation team revealed that a day trader, with the active connivance of an investment officer of the institutional investor, purchased shares before the placement of buy orders by the institutional investor and subsequently sold those shares to the institutional investor.

“The practice continued for a few months. A substantial portion of the trades executed by the day trader during this period matched with trades executed by institutional investor as a counterparty,” it shared.

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This resulted in losses to the institutional investor and gains to the day trader, according to the SECP.

“There is strong evidence that the investment officer of the institutional investor was actively colluding with the day trader,” it said.

Business Recorder reached out to the SECP, but the regulator did not disclose the names of the individuals or the entity it found involved in front-running equity trading.

The article, originally published April 17, 2024, was updated on April 18, 2024 to include Business Recorder’s attempt to reach out to the SECP.