LIC sacks employee involved in front-running case

On Tuesday, Sebi said in a confirmatory order that the restraint imposed vide the interim order dated April 27, 2023, on Yogesh Garg, Sarita Garg, Kamlesh Agarwal, Ved Prakash HUF and Sarita Garg HUF from buying, selling or dealing in securities either directly or indirectly, in any manner whatsoever, will continue until further orders.

“I find that the submissions of the noticees are insufficient to refute the prima facie conclusions drawn in the interim order… the finding in the interim order that the noticees have prima facie front run the trades of the big client resulting in violation PFUTP Regulations stands confirmed,” Sebi’s whole time member Ananth Narayan G said in the order. LIC is a major player in the stock market with a huge portfolio of stocks.

LIC said it has a robust controlling monitoring mechanism along with best practices to prevent any kind of front running activity. “All stringent measures for transactional hygiene of dealing room are put in place, i.e., entry by biometric, CCTV coverage, restriction on electronic gadgets etc,” LIC said.

“LIC has always been in the forefront of being a compliant organization and shall continue to strengthen further on all matters of corporate governance,” the corporation said.

Front-running means usage of non-public information to directly or indirectly, buy or sell securities or enter into options or futures contracts, in advance of a substantial order, on an impending transaction, in the same or related securities or futures or options contracts, in anticipation that when the information becomes public. The price of such securities or contracts may change. Normally employees of mutual funds and insurance companies are seen involved in front running.

In April 2023, Sebi barred five entities, including an employee of Life Insurance Corporation from the securities market and impounded illegal gains of Rs 2.44 crore made by them, in a case pertaining to front-running the trades of the state-owned insurer.

Also, they were asked to “cease and desist” from engaging in any fraudulent, manipulative or unfair trade practice, including front-running.

In its order, Sebi found that Yogesh Garg, being a dealer in LIC, was in possession of non-public information regarding impending orders of LIC and acted as an information carrier. He has also, prima facie, used the account of one late Ved Parkash Garg to trade on the basis of the non-public information of LIC.