BACKGROUNDTo make it easier to catch persons engaged in wrongdoings in securities markets such as front running, insider trading, etc., SEBI has circulated a consultation paper on 18th May, 2023. The paper proposes a special set of regulations (a draft of which is also provided) that would, under certain circumstances, presume a person or group of persons guilty of certain wrongdoing. This would be a rebuttable presumption, and the proposed law also gives a set of defenses that the accused can demonstrate. The proposed law is perhaps an expression of frustration by SEBI that persons have been able to use the latest technology and the unorganised sector to carry out wrongs but without leaving any trace or track whereby SEBI could prove the wrongdoing.
The net cast is wide, and persons engaged in regular trading in securities could face proceedings under this law if their trading has features listed in the proposed regulations, if they become law.
THE TRADITIONAL WAY OF CATCHING WRONGDOERSEssentially, the proposed law says that transactions with a particular pattern shall be deemed to be suspicious, and if they remain unexplained, they will be deemed to be in violation of law and will attract various penal consequences.
The paper expresses concern at the growing use of digital tools and certain other practices and that many transactions which clearly seem to be that of front running, insider trading, etc., go unpu
