LIC halts stock deals for more transparency

To make its stock market investments transparent and avoid further controversy, Life Insurance Corporation (LIC) has discontinued deals that were first negotiated over the telephone and then executed on the stock exchange platform, according to brokers familiar with the matter.

The insurance behemoth, one of the biggest institutional investors in the Indian stock market, conducts all stock transactions through screen-based trading, in which orders are matched electronically and a buyer and seller are unaware of each other's identity.

But LIC has a dedicated phone line for negotiated deals, on which brokers call the insurer and pitch to sell a large quantity of shares on behalf of their clients, brokers said.

Once the terms of the deal are agreed upon, LIC and the seller place simultaneous orders on the stock exchange platform and the trade is executed. The insurer has separate lines for placing screen-based orders through empanelled brokers.

"When we call LIC on the dedicated line these days, it does not show any interest in negotiated deals, even if it is for quality large-cap stocks," said an LIC-empanelled broker, on condition of anonymity.

"The insurer is cautious about this type of transactions now, as earlier some brokers had sold it operator-driven stocks," he added.

Media reports suggested last month that some stockbrokers had jacked up share prices of companies and later sold those stocks to LIC.

Negotiated deals can be smaller than block and bulk deals, which have to be compulsorily reported to stock exchanges on a daily basis.

Bulk deals are transactions in which the total quantity bought or sold is more than 0.5 per cent of the number of company shares listed on the stock exchange.

A trade of a minimum quantity of 500,000 shares, or a minimum value of Rs 5 crore, executed in a single transaction qualifies as a block deal.

The insurer has also not conducted a single bulk or block deal since November 16, according to data available on the websites of stock exchanges.

Prior to that, LIC had done a total of 26 bulk and block deals worth Rs 3,066 crore in 2010, according to BS Research Bureau.

An e-mail query sent to an LIC spokesperson asking the reasons behind not conducting any negotiated deals remained unanswered.

The insurer last month said it had set up a three-member committee to look into the systems and procedures that it followed.