LIC front running case: LIC fires employee who traded in dead father’s demat account in front running case

State-run Life Insurance Corporation of India (LIC) on Wednesday said it has fired an employee, who has been banned by markets regulator Sebi in a front-running case after the incident was reported last year.

“He (the accused employee Yogesh Garg) has been removed from the services of the Corporation following the due administrative procedure by the disciplinary authority consequent to his involvement in the front running,” LIC said in a statement.

Garg, who worked in the equity dealing section, has been accused of front-running trades of LIC, which is the largest domestic institutional investor in the Indian stock market. Trades were executed through the demat accounts of his family members, who are also alleged to be involved in front-running, as well as his late father from January to March 2022.

“Orders for the first leg of their intraday trades were placed and executed just before the impending order(s) of LIC and the order(s) for squaring off their trades i.e., second leg sell/ buy order(s) were placed at a limit price which is less/ more than the buy/ sell order limit price of LIC, ensuring that such sell/ buy order(s) would get matched with the buy/ sell order(s) of LIC,” Sebi said.

Using this modus operandi, the accused are believed to have made a profit of Rs 2.44 crore.

Last night, Sebi passed an order confirming the previous ban on the employee and four other entities involved in the case. The regulator had last year passed an interim order in the case in April 2023.Also read | Sebi deadline looms large over Rs 7 lakh crore mega rally in PSU bank stocksLIC said after the incident came to light it has 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. LICI has always been in the forefront of being a compliant organization and shall continue to strengthen further on all matters of Corporate Governance,” the insurer said.

In its order, Sebi found that Yogesh Garg, being a dealer in LIC, was in possession of non-public information regarding impending orders of LIC and acted as an information carrier.

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 said the observations made in the present order are tentative in nature and pending further investigation.

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