SEBI takes action against front running, prohibits LIC employee and four others from securities market

Sebi on Thursday barred five entities, including an employee of Life Insurance Corporation of India (LIC), from the securities market and impounded illegal gains of 2.44 crore made by them, in a case pertaining to front-running the trades of the state-owned insurer...

These five entities prohibited by Sebi are -- Yogesh Garg, who was working in the investment department of LIC through which trades on behalf of the insurer were placed; his mother Sarita Garg; his mother-in-law Kamlesh Agarwal; Ved Prakash HUF and Sarita Garg HUF, the capital markets regulator said in its interim order..

"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 (LIC) and therefore they are prima facie jointly and severally liable for the proceeds generated from the front-running trades," Sebi said..

By indulging in such trades, they, prima facie, violated the provision of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules. . Accordingly, Sebi has restrained the five entities from buying, selling, or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders. ..

As and when the big client places a buy order, the price of the security rises and the alleged front-runner sells the securities bought earlier, at the raised price, thereby pocketing the difference between the newly raised price of the security which is established post big client's buy trades and the price at which he had bought his securities. ..

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