Rajat Gupta Insider Trading Case: Appellate Decision

Last week, the United States Court of Appeals for the Second
Circuit issued its opinion in United
States of America v. Rajat K. Gupta
, in which it upheld all the findings of
the district court convicting Rajat Gupta on various counts of securities
fraud.
Although several questions were raised in the appeal relating
to the robustness of the evidence in support of the conviction, the appellate
court’s decision is fairly unequivocal in upholding the district court’s
findings. The appellate decision is largely based on the facts and the
admissibility of various types of evidence against Gupta, including through
wiretaps and call records. This ruling effectively stamps a seal of approval on
the use of circumstantial evidence (perhaps even as the sole evidence) in
insider trading and other securities fraud related cases.

Of course, this entire episode that unfolded in
the US has found some impact in India as well. SEBI has sought greater
investigative and information-seeking powers, which have found its way into the
SEBI Act through the recent re-promulgated Securities Law (Amendment)
Ordinance, 2014 that was notified on March 28, 2014. A more substantive
framework on insider trading is expected to be introduced following the
report
of the Justice Sodhi Committee Report on Insider Trading. Nevertheless, some
doubts remain regarding the strength of insider trading regulation in
comparison with the regulatory success enjoyed in enforcing such regulations in
the US, as this
recent
column
by Swaminathan SA Aiyar suggests.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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