SEBI probes LIC employee in front-running case

20 Mar 2024 , 11:38 AM

On March 19, the market watchdog SEBI announced that a Life Insurance Corporation of India (LIC) employee had participated in the front-running of trades for a significant client.

“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 ₹244.09 Lakh (as elaborated in the Interim Order),” the Securities and Exchange Board of India stated in the confirmatory order. I find that the Notices’ submissions are insufficient to challenge the Interim Order’s prima facie judgments, given the reasons covered in the preceding paragraphs.

I also want to point out that a thorough investigation is still going on in this particular case. I do not see any justification or basis for deviating from the Interim Order’s prima facie findings. As a result, the Interim Order’s finding that the Noticees have violated sections 12A (a), (b), (c), and (e) of the SEBI Act as well as regulations 3(a), 3 (b), 3 (c), 3(d), 4(1) and 4(2)(q) of the PFUTP Regulations by frontrunning Big Client’s trades is confirmed.”

These five entities are Ved Prakash HUF, Sarita Garg HUF, Yogesh Garg, who worked in the LIC investment department, his mother Sarita Garg, and his mother-in-law Kamlesh Agarwal.

On April 27, 2023, notice of the interim order was given to the noticees.

Additionally, until further instructions are issued, the noticees are not permitted to access the securities market.

Between January and March of 2022, the regulator received surveillance alerts on potential noticees’ front running, which prompted them to launch an investigation. We looked at trades that occurred between January 1, 2020, and March 15, 2022.

In a statement, LIC clarified the situation, stating that front running is nothing new. “We have further placed robust controlling mechanisms along with best practices to prevent any kind of front running,” it continued.

LIC went on to say that strong controls had been put in place for the trading room’s transactional hygiene, including biometric access, CCTV surveillance, and bans on electronics.

“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 insurance company stated.

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