Dealing with grey

There cannot be a more appropriate time for the book Fraud, Manipulation and Insider Trading in the Indian Securities Markets by Sandeep Parekh than now, at this time of revelations of corporate scandals and judicial actions, regulatory review of the Insider Trading Regulations and the coming into force of the Companies Act 2013, which brings forth onerous responsibilities on the board of directors.

With his vast experience in corporate law and regulatory affairs, Parekh is the right person to dwell on the complex subject of insider trading. This book will strike a chord with practitioners and learners alike. It starts earnestly giving a lucid explanation of ‘fraud’ in common law and statutes and goes on to dwell on Sebi’s regulations, quoting the relevant authorities. One of the interesting things about the book is the extent of research material on corporate fraud jurisprudence that has been quoted.

It is also probably the first time the subjects of mis-selling and unsuitability have been dealt with in any book on securities or corporate fraud. In a financial market heading towards the availability of offshore products over the next few years, regulation against mis-selling assumes significance and one would expect for jurisprudence to develop on this topic. While the Indian securities markets have moved to be more disclosure oriented, minimising the information asymmetry, the complexity and the breadth of financial products that could be structured bring forth the need for adequate investor protection against mis-selling. 

The chapters on fraud in the primary markets, mis-statement and on insider trading provide interesting analysis on how the regulations evolved on account of market misdemeanour and how the Securities Appellate Tribunal and the courts have loudly viewed ‘insider trading’ as a serious securities market offence. The need for the directors and the company secretary to ensure proper governance and disclosure is also brought out in the quoted case laws. 

With the coming into force of the Companies Act, 2013, the responsibilities of directors on governance get enhanced multi-fold. Moreover, Sebi surveillance on listed companies and their actions against insider trading and price manipulation, including the orders against directors on fraudulent practices in IPOs, shows that it is increasingly possible to detect and initiate punitive actions against frauds on investors. This book would be useful to the directors on the board of listed firms and enable them to understand the liabilities that may incur if they aren’t vigilant in enforcing compliance with the laws.

The book, as its author himself admits, is not intended to be a treatise on the subject but the minimal use of legal jargon and the management approach to understanding law ends up being the highlight of the text.