The market regulator, SEBI, confirmed on March 19 that an employee of the Life Insurance Corporation of India (LIC) was involved in the front-running of a big client's trades.
In the confirmatory order, the Securities and Exchange Board of India said, "The Interim Order was passed based on the prima facie conclusions to prevent further perpetration of fraudulent trading activity and to prevent defalcation of the wrongful gains cumulatively amounting to INR 244.09 lakh (as elaborated in the Interim Order). In view of the reasons discussed in the preceding paragraphs, I find that the submissions of the Notices are insufficient to refute the prima facie conclusions drawn in the Interim Order. I further note that a detailed investigation is ongoing in the present matter. I see no reason or grounds to differ from the prima facie findings in the Interim Order, and therefore, the finding in the Interim Order that the Noticees have prima facie front run the trades of Big Client resulting in violation of section 12A (a), (b), (c) and (e) of the SEBI Act and regulations 3(a), 3 (b), 3 (c), 3(d), 4(1) and 4(2)(q) of PFUTP Regulations stands confirmed."
These five entities are -- Yogesh Garg, who was working in the investment department of LIC, his mother Sarita Garg; his mother-in-law Kamlesh Agarwal; Ved Prakash HUF and Sarita Garg HUF.
The interim order was served to the noticees on April 27, 2023. The regulator has impounded illegal gain of over Rs 2.44 crore. The noticees have also been restrained from accessing the securities market until further orders.
The regulator started investigations after they got surveillance alerts about possible front running by noticees, between January 2022 and March 2022. Trades between January 1, 2020 and March 15, 2022, were examined.
LIC issued a clarification on the matter saying that it is an old case of front running. "We have further placed robust controlling mechanisms along with best practices to prevent any kind of front running," it said.
LIC further stated that all stringent measures for transactional hygiene of the dealing room are put in place, i.e., entry by biometric, CCTV coverage, restriction on electronic gadgets etc.
"Appropriate action against the concerned official has been taken by disciplinary authority by his removal from services of the corporation after following the due administrative procedure," the insurer said.
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