The Sebi confirmed a securities market ban on five companies, including an employee of the Life Insurance Corporation of India (LIC), on Tuesday in a case involving the state-owned insurer's front-running trades.
Front-running is an illegal stock market practice in which a business trades based on advanced information obtained from a broker or analyst before it is made accessible to its clients.
The observations presented in this order are preliminary in nature and require additional examination. The investigation shall be conducted without regard for any of the directives issued or observations made in the interim or current orders.
Sebi stated that depending on the results of the inquiry, relevant legal procedures may be initiated.
In a confirmatory order, Sebi clarified that the restraint imposed by the interim order dated April 27, 2023, on Yogesh Garg, Sarita Garg, Kamlesh Agarwal, Ved Prakash HUF, and Sarita Garg HUF from buying, selling, or dealing in securities, directly or indirectly, in any manner whatsoever, will continue until further orders.
"I find that the submissions of the notices are insufficient to refute the prima facie conclusions drawn in the interim order.
"... 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 the big client resulting in violation PFUTP Regulations stands confirmed," Sebi's whole time member Ananth Narayan G said in the order.
In April 2023, Sebi prohibited five organizations, including an employee of the Life Insurance Corporation of India (LIC), from the securities market and seized unlawful earnings of Rs 2.44 crore in a case involving the state-owned insurer's front-running trades.
Powered by VDO.AI. They have also been instructed to "cease and desist" from participating in any deceptive, manipulative, or unfair trade conduct, such as front running.
According to Sebi's order, Yogesh Garg is still professionally linked with LIC. LIC informed Sebi that Yogesh Garg had been transferred from the company's investment department to another department inside the insurance corporation.
The five entities are linked by family ties, a common address, and a common phone number.
In its order, Sebi determined that Yogesh Garg, a LIC dealer, possessed non-public knowledge about LIC's imminent directives and functioned as an information carrier. He also appears to have traded on the account of one late Ved Parkash Garg using LIC's non-public information.
Regarding the other four entities, they or their accounts appear to have had a role in LIC's front-running trades. These entities are accused of making unlawful earnings of Rs 244.09 lakh through what appears to be front-running activities. By engaging in such trades, they appear to have breached the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) laws.
