Securities and Exchange

Primary Legal & Compliance Regulatory Challenges in Securities and Exchange Trading & Investment Companies Sector in India

1. Adherence to SEBI Regulations

The Securities and Exchange Board of India (SEBI), established under the SEBI Act, of 1992, is the apex regulator for securities markets. Companies must comply with its extensive framework, including:

Prohibition of Insider Trading Regulations, 2015: Ensuring that no trading occurs based on unpublished price-sensitive information (UPSI).
Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015: Mandating timely and accurate disclosures of financial and operational performance.
Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011: Governing the acquisition and takeover of listed companies.

2. Anti-Money Laundering (AML) Compliance

Under the Prevention of Money Laundering Act (PMLA), 2002, entities must establish robust KYC mechanisms and submit Suspicious Transaction Reports (STRs) to the Financial Intelligence Unit (FIU-IND). Non-compliance can lead to penalties, investigations, and asset freezes.

3. Foreign Investment Restrictions

Compliance with the Foreign Exchange Management Act (FEMA), 1999, and related regulations issued by the Reserve Bank of India (RBI) is critical for companies receiving Foreign Direct Investment (FDI). Specific sectors may have limits or prohibitions on foreign investments.

4. Taxation and GST Compliance

Companies must navigate complex tax laws, including:

Income Tax Act, 1961: Addressing corporate taxes and capital gains tax obligations.
Goods and Services Tax (GST) Act, 2017: Ensuring proper invoicing, filing of returns, and handling of input tax credits.

5. Data Protection & Cybersecurity

The Personal Data Protection Act, of 2019 (expected to be replaced by the Digital Personal Data Protection Act of 2023) imposes stringent data-handling requirements. SEBI’s cybersecurity guidelines mandate secure IT systems for trading platforms and investor data.

6. Regulatory Arbitrage

Overlapping jurisdictions between SEBI, RBI, and the Ministry of Corporate Affairs (MCA) can create complexities, especially for companies involved in multiple financial services.

7. Environmental, Social, and Governance (ESG) Reporting

SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework requires listed entities to disclose their ESG-related practices and metrics comprehensively.

White-Collar Criminal Trials in the Securities Sector

1. Insider Trading

Trials arising under SEBI’s Insider Trading Regulations, 2015, for trading based on UPSI, often lead to financial penalties, bans, and criminal prosecution under the SEBI Act, 1992.

2. Market Manipulation

Allegations of creating artificial trading volumes, price rigging, or fraudulent transactions are prosecuted under the SEBI Act and the Bharatiya Nyaya Sanhita (BNS) of 2024.

3. Money Laundering

Companies and individuals accused of laundering proceeds through securities markets face prosecution under the PMLA, 2002.

4. Tax Evasion

Prosecution under the Income Tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, for evasion or misrepresentation of taxes.

5. Corporate Fraud

Violations under the Companies Act, 2013, such as misrepresentation in financial disclosures or defrauding shareholders, may lead to criminal proceedings.

6. Ponzi Schemes

Unauthorized collective investment schemes prosecuted under SEBI’s Collective Investment Schemes (CIS) Regulations, 1999, and the Banning of Unregulated Deposit Schemes Act, 2019.

7. Cyber Fraud

Cases under the Information Technology (IT) Act, 2000, for breaches of cybersecurity and misappropriation of investor funds.

How Duke & Baron Can Assist

Legal Advisory and Compliance Services

1. SEBI and Other Regulatory Compliance

Advising on compliance with SEBI’s LODR, SAST, and Insider Trading Regulations.
Assisting in drafting and implementing compliance frameworks, including code of conduct, whistleblower policies, and corporate governance structures.

2. AML/KYC Framework

Developing and implementing anti-money laundering and KYC policies.
Preparing and submitting regulatory reports, including STRs to FIU-IND.

3. Foreign Investment Structuring

Advising on FDI structuring and compliance with FEMA and RBI guidelines.
Drafting agreements and filings for inbound and outbound investments.

4. Tax and Financial Compliance

Offering strategic advice on corporate tax planning, capital gains tax optimization, and GST compliance.
Representing clients in tax audits and disputes before appellate tribunals.

5. Data Protection and Cybersecurity

Advising on compliance with the Personal Data Protection Act and SEBI’s cybersecurity framework.
Drafting data protection policies and conducting IT audits.

6. ESG and Corporate Governance

Assisting in ESG reporting, sustainability audits, and compliance with BRSR requirements.
Conducting corporate governance reviews and training sessions for directors.

Representation Before Judicial and Quasi-Judicial Bodies

1. Commercial Suits

Filing and defending commercial suits in specialized commercial courts under the Commercial Courts Act, 2015.
Drafting pleadings, interim applications, and handling arbitration or mediation proceedings.

2. Regulatory Investigations and Proceedings

Representing clients before SEBI, RBI, and other regulatory bodies during compliance audits, investigations, and adjudication proceedings.
Preparing replies to show-cause notices and handling hearings effectively.

3. Criminal Trials for White-Collar Offenses

Defending companies and executives in trials under:
- SEBI Act, 1992, for insider trading and market manipulation.
- PMLA, 2002, for money laundering allegations.
- BNS of 2024, for corporate fraud and misrepresentation.
- IT Act, 2000, for cyber fraud.
Handling bail applications, charge framing, and trial proceedings.

4. Tax Litigation

Representing clients in appeals before the Income Tax Appellate Tribunal (ITAT), High Courts, and Supreme Court.

Crisis Management

1. Internal Investigations

Conducting forensic audits and internal investigations to detect and mitigate fraud or non-compliance.
Preparing confidential reports and advising on remedial actions.

2. Regulatory Crisis Support

Assisting in responding to SEBI notices, conducting compliance reviews, and negotiating settlements under the SEBI Settlement Scheme.

Training and Awareness

1. Workshops for Employees

Conducting training sessions on insider trading regulations, AML guidelines, and data protection.

2. Corporate Governance Training

Educating board members on governance best practices and regulatory obligations.

At Duke & Baron, we combine deep legal expertise with a nuanced understanding of financial markets to support our clients comprehensively. Whether through proactive compliance support, effective litigation strategies, or robust defence in criminal trials, we stand as steadfast partners in navigating the complex securities landscape in India.