LIC issues clarification on employee's role in front-running of big client's trade

LIC has issued a clarification on Sebi action involving the insurer's employee who was engaged in front-running of a client's trades.

"We have further placed robust controlling mechanisms along with best practices to prevent any kind of front running. 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," LIC said in a filing. 

"LIC has always been in the forefront of being a compliant organisation and we will continue to strengthen further on all issues of Corporate Governance".

In its 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.