insider trading has sparked off a debate about the state of insider trading
enforcement in India. While several cases have been pursued by SEBI in the last
two decades since insider trading has been prohibited by regulation, the rate
of successful convictions or regulatory sanctions has been minimal.
in the Business Standard states that while “Mr Gupta will join some 40-odd
insider traders who have been successfully prosecuted in the last three years
by Preetinder Singh Bharara, the US attorney for the Southern District of New
York (which includes Wall Street)”, the position in India operates in
always been rampant on Dalal Street. In the past three fiscal years alone
(until December 2011), the Securities and Exchange Board of India (Sebi)
investigated … 57 [cases] pertain[ing] to insider trading …. Of these, 28
insider trading cases were solved …. There were some suspensions and
prohibitions. Some warnings were issued. In [some] cases, Sebi ordered the
disgorgement of issue proceeds, and it issued many consent orders. But nobody
went to jail.
insider trading cases is a tall order, particularly given the unavailability of
direct facts and evidence to prove charges. SEBI has recently relied on
circumstantial evidence to initiate action on two cases (discussed on The
Firm), but it remains to be seen whether they will be upheld if taken up on
the evidentiary aspects of insider trading. As this report
in the Economic Times (ET) observes:
trading case became public, Sebi had approached the government for powers to
tap phone calls for suspected insider trading and other securities frauds.
that Sebi may finally get access to phone call records of people suspected of
insider trading and other market-related illegal activities. The need of the
hour, according to market players, is not only the use of the latest tracking
technologies to crack down on such unscrupulous people on the Street, but also
to set some reasonable timeframe to close these cases.
investigated by SEBI and the current outcome of those.
At the same time, it is not as if SEBI lacks
adequate enforcement powers. Somasekhar Sundaresan has previously demonstrated
as to how SEBI has greater powers than the US SEC on several counts.
Ultimately, what matters is the effective use of the powers rather than their availability
in the statute books.