LIC front-running case: Sebi bans three individuals, two entities from stock market
April 28, 2023
LIC front-running case: The list includes Yogesh Garg, his mother Sarita Garg, his mother-in-law Kamlesh Agarwal, Ved Prakash HUF and Sarita Garg HUF. HUF stands for Hindu undivided family.
Market regulator Sebi has banned three individuals, an Life Insurance Corporation (LIC) employee Yogesh Garg and his relatives from buying, selling or dealing in securities either directly or indirectly until further order. The case pertains to LIC front-running, where the five entities confiscated illegal gains of Rs 2.44 crore, front-running the trades of the insurer.
The list includes Yogesh Garg, his mother Sarita Garg, his mother-in-law Kamlesh Agarwal, Ved Prakash HUF and Sarita Garg HUF. HUF stands for Hindu undivided family.
Sebi order
The Sebi order states that the five individuals and entities must square off open positions in any exchange traded derivative contracts within 3 months from the date of the order or at the expiry of such contracts, whichever is earlier.
"The said entities are permitted to settle the pay-in and pay-out obligations in respect of transactions, if any, which have taken place before the close of trading on the date of this order," Sebi said in its order.
Case history
Yogesh Garg, son of Ved Prakash Garg, was appointed in LIC in 2011 as an Assistant Administrative Officer(AAO). He thereafter worked as an AAO in Kolkata, Rohtak and Delhi offices of LIC. He also worked as an Administrative Officer (AO) in the investment department of LIC in Mumbai from May 2019 to April 2022. The investment department of LIC is considered as a sensitive department.
Sebi said as a dealer in LIC, Garg had knowledge of confidential, non-public information regarding the size and timing of impending buy/sell orders of big client LIC, which could impact the price of the underlying scrip, during the examination period
Sebi advice to LIC
Sebi has advised LIC to review its extant processes and take all necessary additional measures as may be necessary to prevent, detect, and remediate any fraudulent, manipulative or unfair trade practices by its employees in relation to its investment activities.
Front-running activity
For a trading activity to be consider as front-running two important factors need to be determined.
The first is there should be an information which is not publicly available regarding substantial impending order of big client in a security and the alleged front runners place orders in security (directly or indirectly) while in possession of the aforesaid non-public information in advance of large order to be placed by the big client.
[Business Today]
