LIC shares fall amid front-running fiasco; insurance major issues clarification

Shares of Life Insurance Corporation of India (LIC) edged lower during the trading session on Wednesday after Sebi confirmed involvement of one of its employees in a front running case of a big client’s trades.

However, the insurance behemoth has shared its clarification in the matters.

The Securities and Exchange Board of India (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 Rs 2.44 crore (as elaborated in the Interim Order),” in its confirmatory 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 Notices 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,” it said.

Yogesh Garg, who was working in the investment department of LIC, his mother Sarita Garg; his mother-in-law Kamlesh Agarwal; Ved Prakash HUF and Sarita Garg HUF are the five entities named. They have also been restrained from accessing the securities market until further orders.

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.

Share of LIC dropped more than 1 per cent to Rs 871 on Wednesday, commanding a total captitalisation of more than Rs 5.51 lakh crore. The scrip had settled at Rs 879.50 in the previous trading session. The stock has tumbled about 26 per cent from its 52-week highs at Rs 1,175.

“We have 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, that is, entry by biometric, CCTV coverage, restriction on electronic gadgets and more,” said LIC in its clarification.

“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. LIC has always been in the forefront of being a compliant organisation and we will continue to strengthen further on all issues of corporate governance,” it added.