LIC Employee Who Traded In Dead Father's Demat Account Fired

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LIC Employee Who Traded In Dead Father's Demat Account Fired

LIC Employee Who Traded In Dead Father's Demat Account Fired (images: LIC facebook)

The Life Insurance Corporation of India (LIC) has fired an employee who traded in his dead father’s demat account. The market regulator, Securities and Exchange Board of India (SEBI) has confirmed the employee’s involvement and has banned five entities, to front running trades of the LIC. The ban includes the fired employee too.

The LIC said, “he (Yogesh Garg, the employee who is accused of front running) 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.”

Yogesh Garg, was an employee in the equity dealing section. He has been accused of front-running trades of LIC, the main domestic institutional investor in the stock market. The trades were carried out through the demat accounts of his family members, who are also involved in front-running. These accused are believed to have acquired a profit sum of Rs. 2.44 crore, reported the ET.

With the incident coming into light, the LIC said that firm measures have been set for transactional hygiene. “We have further placed robust controlling mechanisms along with best practices to prevent any kind of front running,” the LIC said. The insurer also added that, “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 HT reported

On this matter, the SEBI 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.”

SEBI had begun to investigate the matter after they received surveillance alerts that could be front running, between the time period, January 2022 and March 2022. Last year, in April 2023, SEBI had passed an interim order in the case. SEBI had found Garg, a dealer in LIC, was in possession of non-public information relating to the impending LIC orders and was also an information carrier. Of now, the observations are impending and tentative, SEBI said, and would be further investigated.

Front-running is an illegal practice in the stock market. In front running, an entity trades on advanced information received from a broker or an analyst, before the information is available to its clients. Usually brokers have access to such non-public information.