Sebi Bars Three Individuals, 2 Entities For Front-Running Trades In LIC

The five included Yogesh Garg, who works in the investment department of LIC, Sarita Garg, Kamlesh Agarwal, Ved Prakash HUF and Sarita Garg HUF. All of them were found to be connected through family relations

Indian capital markets regulator, the Securities and Exchange Board of India (Sebi), has barred five entities, including an employee of Life Insurance Corporation of India (LIC), from dealing in the securities market and confiscated illegal gains of Rs 2.44 crore they amassed in a case pertaining to front-running the trades of the insurer.

The five included Yogesh Garg, who works in the investment department of LIC, Sarita Garg, Kamlesh Agarwal, Ved Prakash HUF and Sarita Garg HUF. All of them were found to be connected through family relations, the regulatory body said in an interim order on April 27.

During investigation conducted from 2020 through 2022, the Sebi found that Yogesh Garg was involved in front running the trades of the insurer in stocks like Astral, Havells India, Aditya Birla Sun Life AMC and Bharat Dynamics.

Using non-public information, Garg would place his buy order before LIC's. As and when LIC placed its buy order, the price of the stock went up and Garg sold the securities bought earlier, thereby pocketing the difference.

"The trading pattern in accounts of late Ved Parkash Garg (father of Yogesh Garg) shows that the first leg of trades was placed/executed just prior to the impending orders of LIC and the second leg of the intra-day trade (squaring off trades) were placed prior to the last tranche of order by LIC," as per the Sebi order.

The regulator has asked LIC to review its extant processes and take necessary measures to prevent, detect, and remediate any fraudulent activities. Meanwhile, the people named in the order have been given 21 days to file their reply.

In another case, the Sebi barred Karvy Investor Services Ltd (KISL) from taking new clients for allegedly violating regulatory norms. The order came after Sebi carried out an physical inspection for the purpose of verifying its compliance status with various regulatory requirements while handling the public issues of debt securities during FY21-22.

In a 13-page ex-parte ad interim order, the regulator found that KISL neither has any physical infrastructure nor any employee working for it. Without any physical infrastructure and employees no merchant banking activity can be carried out. So, it is concluded that KISL is no longer in operation as a Sebi-registered merchant banker.