India’s largest insurance company LIC(Life Insurance Company) dismissed an employee, Yogesh Garg, on Wednesday, for his involvement in the front-running scheme which is currently being investigated by the Securities and Exchange Board of India (SEBI).
In an exchange filing on Wednesday LIC confirmed Garg’s removal, stating “Yogesh Garg was an employee in the cadre of Administrative Officer of LIC. He 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 an exchange filing.
This action comes after SEBI confirmed that the ban imposed on Yogesh Garg, Sanita Garg, Kamlesh Agarwal, Ved Prakash HUF, and Sanita Garg HUF from buying, selling, or dealing in securities either directly or indirectly in any manner will be continued. The ban was imposed on 27 April 2023. This confirmatory order was released on Tuesday
Sebi’s whole-time member Ananth Narayan G, in the confirmatory order, stated “I find that the submissions of the noticees are insufficient to refute the prima facie conclusions drawn in the interim order… the finding in the interim order that the noticees have prima facie front run the trades of the big client resulting in violation PFUTP Regulations stands confirmed,”
LIC is a major player in the Indian stock market, upholding a massive portfolio, and ensuring its investors of tie commitments to ethical practices. The corporation highlighted its robust control and monitoring mechanisms designed to prevent front-running activities. The exchange filing reads, ”All stringent measures for transactional hygiene of dealing room are put in place, i.e., entry by biometric, CCTV coverage, restriction on electronic gadgets etc.”
LIC further emphasized its commitment to good corporate governance, stating, “LIC has always been in the forefront of being a compliant organization and shall continue to strengthen further on all matters of corporate governance.”
Front-running involves using undisclosed information about future trades to purchase or sell securities for personal profit before it becomes public knowledge. This illicit behavior unfairly benefits the wrongdoer and damages the honest investors.
Before Sebi banned Garg and four other entities, the accused gained 2.44 crore from the stock market using LIC trade secrets. which were also impounded. The order also directed them to “Cease and desist” from engaging in any fraudulent or manipulative trade practices.
Yogesh Garg was working as a dealer at LIC and in his capacity he possessed non-public information about pending large orders by the insurance company. He acted as an “Information carrier” and used an account belonging to the deceased Ved Prakash Garg to make deals in the stock market based on this confidential information.
LIC’s swift action in dismissing Garg and its emphasis on robust compliance measures send a strong message to its investors and the market at large. It demonstrates the company’s commitment to ethical practices and safeguarding investor’s interests.
However, the incident also put a spotlight on the need for continuous vigilance and more strict regulation to prevent such fraudulent activities.
