Monday, March 31, 2014

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.

1 comment:

Anonymous said...

Have we looked at this perspective "Racism in Financial Market Regulation". Refer to post dated Nove 14 at