Contextualizing culpablity in securities fraud : An investigation into requirement of intent

Abstract

Robust enforcement mechanism against market manipulations is integral to securities regulations. Fraud being one of the most stigmatized and morally corrupt forms of market manipulation is always on constant scrutiny by SEBI. However, Indian legislature has erred while delineating fraud under securities regulations. The omission of the elements of intention or deception in scrutinizing fraud within the securities market represents a departure from the approach adopted by the United States, wherein scienter is a pre-requisite for establishing securities fraud, which served as a foundational reference point in the formulation of our domestic securities law policy. Such a departure has led to intolerable vagueness in defining the contours of fraud under FUTP Regulations. Conception of fraud devoid of any intention requirement or absence of elementary analysis into mental state raises concerns for it being not justified on either legal or philosophical fronts. This paper takes a critical stand against legislative action which eliminates the requirement of intention or deception in establishing fraud under FUTP regulations. This paper argues that elimination of intention or deception requirement renders conception of fraud directionless. This paper juxtaposes various notions of fraud and provisions regulating securities fraud in the United States and the United Kingdom with those of the FUTP Regulations, conclusively attempting to establish the definition of fraud under FUTP regulations for being specious. Keywords: Fraud, intention, scienter, deception, vagueness etc.