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SEBI turns to big data to nail the smart violators

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India’s capital markets regulator is casting its net wider to catch the savvier violators of the country’s stock market laws. While the Securities and Exchange Board of India so far mostly relied on tips and information from exchanges and market intermediaries to investigate white collar crimes, an ever-growing domestic stock market meant that these methods lacked the teeth to build water-tight cases against insider trading violations. This forced the watchdog to up the game, combining technology including data
analytics, call records, bank transaction links and even social media connections as evidences to nail wrongdoers.

In the wake of increase in use of modern technolgoies by the regulator and changing landscape of regulatory law, Sumit Agrawal of Regstreet Law Advisors and Sandeep Parekh of Finsec Law Advisors have provided their expert views in the detailed article published by The Economic Times today.

Sumit is of the view that “While Sebi continues to rely upon the content on the Internet to allege serious charges of insider trading and securities fraud, the judiciary has not validated Sebi’s manner of
inferences on most issues, since the Internet is only a component of the secondary data sources under evidence law.”

Sandeep is of the view that “Technology used to piece together insider trading cases has created “irrefutable presumptions of guilt. Once a person is connected to another through Facebook or LinkedIn, or even through phone conversations, the person often
has to rebut claims that illegal information was passed on. In the absence of a camera fitted on a person’s head 24X7, that is impossible to rebut. Thus, we have insider trading charges against people who actually sold before good news has been made public. A combination of a smaller world and the presumptions raised by the regulator often create cases where innocent connections or conversations are presumed to be improper.”

Read the comments and the detailed The Economic Times article at https://lnkd.in/dvUA6sMc

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