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SEBI Confirms Involvement of LIC Employee, Other Entities in Front-Running Case of ‘Big Client’; Markets Regulator Imposes Ban

SEBI LIC Front Running News: Securities and Exchange Board of India (SEBI) has confirmed a securities market ban on five entities, including an employee of Life Insurance Corporation of India (LIC), in a case pertaining to front-running trades of the state-owned insurer.

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In April 2023, Sebi barred five entities, including an employee of Life Insurance Corporation of India (LIC), 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. They have been asked to “cease and desist” from engaging in any fraudulent, manipulative or unfair trade practice, including front-running.

What is Front-Running?

Front-running refers to an illegal practice in the stock market where an entity trades based on advanced information from a broker or analyst before the information has been made available to its clients.

SEBI LIC Front Running News: What SEBI Said?

“I find that the submissions of the noticees are insufficient to refute the prima facie conclusions drawn in the interim order. “… 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 the big client resulting in violation PFUTP Regulations stands confirmed,” Sebi’s whole time member Ananth Narayan G said in the order.Expand article logo  Continue reading

The observations made in the present order are tentative in nature and pending further investigation. The investigation will be carried out without being influenced by any of the directions passed or any observation made either in the interim order or in the present order.

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Based on the outcome of the investigation, appropriate proceedings may be initiated in accordance with law, Sebi said.

In a confirmatory order, Sebi clarified 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, shall continue until further orders.

SEBI LIC Front Running News: Details of 5 Entities

According to Sebi’s directive, Yogesh Garg remains professionally affiliated with LIC. LIC has informed Sebi that Yogesh Garg has been relocated from the investment division to another department within the insurance company. The five entities share familial ties, a common address, and a common phone number.

Sebi’s investigation concluded that Yogesh Garg, as an LIC dealer, possessed non-public information concerning impending LIC orders and acted as a conduit for this information. Furthermore, there is prima facie evidence suggesting that he utilized the account of the deceased Ved Parkash Garg to engage in trading based on LIC’s confidential information.

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Regarding the remaining four entities, Sebi determined that they or their accounts were seemingly involved in front-running LIC trades. These entities are accused of illicitly profiting from front-running activities totaling Rs 244.09 lakh, as per prima facie evidence. By partaking in such transactions, they have seemingly contravened the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations.

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