SEBI bans five entities in LIC front running case, impounds Rs 2.44 crore

Mumbai (Maharashtra) [India], April 28 : Financial markets regulator Securities and Exchange Board of India (SEBI) has banned three individuals and two entities (in total five) from securities markets in a case of front-running trades in Life Insurance Corporation of India.

The practice by dealers of dealing with advance information provided by their brokers and investment analysts, before their clients have been given the information is known as front running.

Of the individuals was LIC's employee Yogesh Garg since November 08, 2011. The rest are Sarita Garg, Kamlesh Agarwal, Ved Prakash HUF, and Sarita Garg HUF.

Also, SEBI impounded Rs 2.44 crore in total from their accounts.

SEBI's interim order on Thursday said the entities shall cease and desist from, directly or indirectly, engaging in any fraudulent, mpulative or unfair trade practice including front running thereby committing or causing a violation of any provisions under relevant laws.

"...it is prima facie concluded that Noticees 1 to 5 (five entities) were involved in a scheme to front run the trades of the Big Client and therefore they are prima facie jointly and severally liable for the proceeds generated from the front running trades," the SEBI order read.

It was prima facie observed that Yogesh Garg, being a dealer in LIC, was in possession of non-public information regarding impending orders of LIC and he acted as an information carrier.

SEBI concluded that these five entities had a distinct role to play in the fraudulent scheme devised for front-running the orders of LIC.

The entities are now directed to provide a full inventory of all assets held in their name, whether movable or immovable or any interest or investment or charge on any of such assets, including details of all bank accounts, Demat accounts and mutual fund investments, immediately but not later than 15 days.

Against that backdrop, SEBI advised LIC to review its processes and take all necessary additional measures to prevent, detect, and remediate any fraudulent, mpulative or unfair trade practices by its employees in relation to its investment activities.

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