This article has been written by Srishti Sharma, from IIMT and school of law, affiliated to GGSIPU.


The Guest – Anand Narayan, he’s a legal manager at Anand Rathi securities. He’s also the faculty in LawSikho for Securities Laws Course. He has significant experience in representing clients before the Securities Appellate Tribunal and SEBI.

The Host – Komal shah, she’s the content head and Co-founder at LawSikho. She is a qualified Company Secretary with an experience of over 12 years leading the company secretarial and corporate governance functions of multinational companies. Komal has been working on online education.

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What is Securities law?

Securities law (or Capital Markets law) is the group of laws and regulations that govern the issuance of securities. A security is a financial instrument usually designed to raise money for a business from investors in the business. Securities law dictates what a corporation has to do in order to offer their investment to the public. The laws exist in order to make sure that public investments are fair to everyone who might invest in the company.

What all gets covered under securities law?

Traditionally we have two forms of practices in securities law. One is either you start the securities litigation by joining a litigation firm, the second one is you join those companies which are doing IPO (Initial Public Offering). The Securities Act of 1933 has two basic objectives: To require that investors receive financial and other significant information concerning securities being offered for public sale; and. To prohibit deceit, misrepresentations and other fraud in the sale of securities.

What are the acts and rules?

Any law that governs the issue of securities also governs the dealing in securities. Any kind of dealing that you do with the securities is covered under the securities law and for this you have the parent legislation which is the Companies Act. Then you have legislations created by SEBI because any kind of issue if securities to the public is governed more or less by the SEBI laws but any kind of private issues are to a large extent covered within the realm of the  Companies Act.

What are preference shares?

Preference shares, more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stockholders are entitled to be paid from company assets before common stockholders. Most preference shares have a fixed dividend, while common stocks generally do not. Preferred stock shareholders also typically do not hold any voting rights, but common shareholders usually do.

How do we start learning about securities law from scratch?

Think about the recent orders which have been passed by SEBI and try to learn from which you come across in your day to day life in terms of SEBI regulations.

What types of work are covered under securities law?

Regulatory Advisory – in this you are advising clients on the applicability of the regulations to them like from the take over regulations, the insider trading regulations to the really major regulations where people can get a significant penalty. Regulatory securities law is helping a client comply with the myriad of state and federal regulations that apply to security offerings. Both before and after a business is offered to the public for investment, the business must comply with regulatory filings and mandatory information disclosures. They must prepare statements both quarterly and annually. Securities lawyers help their clients comply with the regulatory process by preparing and reviewing mandated disclosures.

You are also advising people or companies which are going to get listed on what are the kind of regulatory restrictions or requirements that would become applicable to them post getting listed. 

Transactional Advisory – (Due Diligence, Drafting, Review)

Plays a vital role as part of a team of specialists, working with people from varied disciplines to help large clients manage and execute high-profile transactions. You will have to bring your analytical skills and real-world experience to diverse situations and unique problems.

Compliance – In many organizations, the Compliance Function encompasses elements of advisory (including, in some cases, legal advice), monitoring, assurance, control and the management of regulatory relationships. The compliance officer have to ensure that there has to be a Chinese ball between your execution services and your investment services.

Litigation – When disputes arise in buying and selling securities, lawyers who practice securities law become litigators. They prepare filings for court. They participate in the traditional activities of litigation including discovery, motion practice and trial. Many litigation cases go to arbitration, so attorneys who practice securities law must be skilled in arbitration.

Attorneys working in securities regulation may represent both corporations and investors. When an investor believes that a corporation has acted with fraud or has otherwise failed to comply with securities regulations, they may seek the help of a securities lawyer to help them pursue a remedy. In turn, corporations rely on attorneys to help them defend against allegations of fraud.

Who Is a Research Analyst?

A research analyst is a professional who prepares investigative reports on securities or assets for in-house or client use. Research analysts scour public market information and glean valuable insights for the use of companies in buying, investing and selling products or services. Their specialty is condensing large amounts of information into workable financial advice for their clients. As a research analyst, you may specialize in finance, equity or investment markets, among other sectors. Your services may be provided on a freelance basis, you may work for an agency or you may be employed in-house within an organization. Those with experience in marketing, investment or company finance may pursue careers in research analysis.

What are the roles of a securities lawyer?

  1. As a legal counsel in listed companies (Should know how to draft the best response to a SEBI Show cause notice).
  2. compliance of listed companies (you need a CS degree for this).
  3. As a compliance officer in intermediaries.
  4. Due diligence for securities issues – as legal advisors to the issue.
  5. Advisory and compliance services on specific transactions such as takeovers.
  6. Representing clients before the SEBI and stock exchange arbitration matters.
  7. Representing clients before the Securities Appellate Tribunal- costs of drafting and appearance are separate.

Are the Banking and Securities laws the same?

There is an inter-relationship between Banking and Securities laws. As it has been stressed, banking regulation is primarily designed to prevent systemic risk while securities regulation is primarily for investor protection and efficiency enhancement. But this does not necessarily imply that a switch from banking to market finance would reduce systemic risk. Sophisticated financial markets require the participation of many intermediaries and systemic risk may be created if any of these go bankrupt and there is contagion to the rest of the financial system.

Sophisticated financial markets require the participation of many intermediaries and systemic risk may be created if any of these go bankrupt and there is contagion to the rest of the financial system. Changing regulation to prevent this may not be very effective.

What is the Arbitration mechanism where Stock Exchanges are concerned?

Arbitration in Stock Exchange is a quasi-judicial process of settlement of disputes between trading members, investors, clearing members, sub-brokers, authorized persons etc., To decide the dispute quickly. 

The Arbitration procedure is governed by the provisions of Arbitration and Conciliation Act 1996 and in addition to this the same is governed by the Rules, Bye laws, Regulations and circulars issued by NSE and SEBI from time to time. The first forum where the client can file a case against the stock broker or vice versa is the arbitration panel of stock exchanges because when a client opens a demat account, he enters into a member constituent agreement and that agreement has  provision for arbitration. If you are a stock broker, you cannot bring your lawyer but you can always bring your in-house Counsels. And from there either party can appeal before the High Court under the relevant provisions of the Arbitration and Conciliation Act.

What gaps according to you are there in the market?

There are some things no one is doing:-

  1. Compliance checks or system adults for listed companies.
  2. Pre-transaction assessment for promoters transactions.
  3. Developing employee friendly policies – most listed companies do this mechanism and this can prove costly.
  4. Employee training – compliance and company secretarial department would take this up easily.
  5. White collar crimes expertise – you need to understand the system.
  6. Writing – there are more or less no specific books available on guidance relating to securities laws.

How can LawSikho help you to get into this area?

If you look at most courses you will find SEBI regulations put together in one domain, you will find litigation put in one domain. So we brought all of them together to be able to deal with entire game of securities laws. This course not only covers your Securities laws but it covers Capital Markets, Insider Trading and SEBI litigations too. So these are the large area of practice in itself combined altogether in one course because we want to focus on what kind of work that people do in this area.

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