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We speak to Chief Legal Officer at Kotak Mahindra, Ajay Vaidya. Kotak Mahindra has been one of the top three investment banks this year. Kotak led 17 of the 20 largest Indian transactions, including, Coal India, NTPC, SKS Microfinance and a host of large cap transactions.
Your thoughts on the role of in-house lawyers / compliance departments at investment banks.
Ajay Vaidya: I feel it is an extremely important function, seeing the way India is developing on the regulatory front. The role is important in terms of risk management and in guiding people internally. It’s high time that not only in the financial sector, but across India, companies invest in this important position as they can take care of not just the legal contractual issues but other important issues, for example, such as setting up internal procedures for compliance with the US Foreign Corrupt Practices Act, if applicable and insider trading aspects as these are extremely important functions.
I don’t see development in Indian firms across and I think the general counsel/in-house counsel has to be developed. Traditionally it’s been just a coordination role between internal and external lawyers. I don’t think that works in India anymore and it’s going to be highly risky if continued.
What are the factors considered while appointing external legal advisors (law firms) in IPO/QIP transactions?
Ajay Vaidya: They are competence, capabilities and experienced people. The most important thing that I look for in a legal firm is the legal team. I look at not only the partners, but the depth of the team and if the transactions are run at an associate or senior associate level. It’s the depth of the firm in terms of understanding and knowledge of the products. It’s something I would look into very deeply. If it’s a firm with a very strong partner, but has a very weak team under him, personally I won’t go for it. I will only go for a very good team rather than an individual.
Bar & Bench: Your thoughts on the quality of legal advice on Indian capital markets transactions. Any specific areas of improvement?
Ajay Vaidya: Frankly, it can definitely improve. I find that legal firms are sometimes a little less conscious of the practical deal making. For example, if I need advice on the stock exchange, I don’t think there are many lawyers with in-depth understanding of issues such as how settlements happen, margins etc.
I feel at times their knowledge of practical aspects of a capital markets transaction could improve its theoretical from the way I look at it. I think they could develop a better understanding of the products and be better advisors.
Today looking for case law is very easy; you can go through Manupatra and easily retrieve information. What is important is that you should understand that law has also moved in India. It has become a liberalized regime from a very rigid regime. It is important to understand this move. Also, the national law colleges create good lawyers and there is fundamental teaching about law today, compared to that of earlier colleges there is a better understanding of the concepts of law.
If you are going to be a capital markets lawyer, you should have extremely good knowledge about the capital markets.
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