INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Bhanu Jindal and Khushi Mittal, AZB & Partners
The PCA imposes liability on any individual associated with a commercial organisation, including foreign enti - ties operating in India, who offers undue advantage to a public servant to secure an improper business advantage. An “associated person” can be a director, employee, consultant, or any individual whose rela - tionship with the organisation is relevant. The totality of their involvement, not just their formal role, deter - mines liability. 3.3 Anti-Bribery Regulation At present, there is no specific obligation to disclose bribery and influence peddling in India. There is, how - ever, a defence available to the bribe giver in the event that they have been compelled to bribe, and after being so compelled, they informed the law enforce - ment agency within seven days of the act of being compelled. The PCA recognises that a “commercial organisation” shall not be liable to such prosecution if it is able to prove that it had in place adequate procedures for preventing persons from undertaking such conduct. The PCA states that the central government shall prescribe such adequate procedures; however, none have been notified to date. Until such time, a com - mercial organisation may choose to frame its own policies and conduct regular internal training to avail of this defence. 3.4 Insider Dealing, Market Abuse and Criminal Banking Law Insider trading is governed by Sections 12A and 15G of the SEBI Act along with the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”). Regulation 2 (1)(g) of the PIT Regulations defines an “insider” as a “connected person” or any person in possession of or having access to unpublished price- sensitive information (UPSI), regardless of how the person came into possession or had access to the UPSI. A connected person includes, inter alia, a per - son sharing a household/residence with a connected person. The definition of a connected person has also been expanded from “immediate relative” to “rela - tive”. Key elements of insider trading include dealing in securities using UPSI, unlawfully communicating
UPSI, and counselling or procuring others to trade based on UPSI, except when permitted by law. Exceptions to this include instances where the com - munication or procurement of UPSI was carried out for legitimate purposes, performance of duties, or the discharge of legal obligations. While there exists a presumption against the insider, the Supreme Court has held that the same is subject to demonstration of foundational facts by SEBI. A person found guilty of insider trading faces a mini - mum penalty of INR1 million, which can be increased up to INR250 million or three times the profit made, whichever amount is higher. Stock price manipulation is both regulated and crimi - nalised under SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”). SEBI pro - hibits the use or employment of any manipulative or deceptive device or artifice to defraud, and any act of fraud committed in connection with the issue, pur - chase, or sale of any securities listed or proposed to be listed. The PFUTP Regulations clarify that any act of diver - sion, misuse, or siphoning off of assets or earnings of a publicly traded company, as well as any conceal - ment of such acts, is regarded as manipulating the books of accounts or financial statements of the com - pany, which directly or indirectly influence the price of its securities. Dealing in securities is deemed manipulative or a fraudulent/unfair trade practice if it involves actions such as knowingly creating a false or misleading appearance of trading in the securities market, or engaging in transactions intended solely to inflate, depress, or cause fluctuations in the price of a secu - rity for wrongful gain or to avoid loss. Any person who contravenes or attempts to contra - vene or abets the contravention of the provisions of the SEBI Act along with its regulations is punishable with imprisonment for up to ten years, a fine of up to INR250 million, or both.
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