Power of SEBI to impose penalties

With effect from 1995, the SEBI has been empowered to impose penalties on different intermediaries for defaults.

Penalty for Failure to Furnish Information on return: The SEBI can impose penalties as detailed below;

1. For failure to furnish any document. Return, report not exceeding one lakh and fifty thousand rupees for each such failures;
2. For Failure to file any return/furnish any information, books or documents within the specified time to exceeding fifty thousand rupees for each day.
3. Failure to maintain books of accounts/ records not exceeding ten thousand rupees for each day.

Penalty for failure to Enter into Agreement with Clients: by a registered intermediary not to exceed Rs 5 lakh for every failure.

Penalty for failure to Redress Investor Grievances by a registered intermediary having been called upon by the SEBI not to exceed Rs 10,000 for each such failure.

Penalty for certain Defaults in Case of Mutual Funds: (1) default in not obtaining certificate of registration not to exceed Rs 10,000 for each day or Rs 10 lakh whichever is higher; (2) default in not complying with the terms and conditions of the certificate of registration not to exceed Rs 10,000 for each day or Rs 10 lakh, whichever is higher (3) default in failing to make an application for listing of schemes not to exceed Rs 5,000 per day or Rs 5 lakh, whichever is higher; (4) default in not dispatching unit certificates not to eceed Rs 5,000 for each day of default; (5) default in failing to refund application money not to exceed Rs 1,000 for each day of default and (6) default in failing to invest collected money not to exceed Rs 5 lakh for each such default.

Penalty for failure by an Asset management Company: to observe rules and regulations providing for restriction on its activities not to exceed Rs 5 lakh for each such failure.

Penalty for Default in Case of Stock Brokers: (1) for failure to issue contract notes in the form and manner prescribed by the stock exchange, not to exceed five times the amount for which the contract note was required to be issued; (2) failure to deliver any security/payment; the amount due to the investor in the manner and within the period specified in the regulations not to exceed Rs 5,000 for each day of default; (3) for charging brokerage in excess of that prescribed by the regulation not to exceed Rs 5,000 or five times the excess charge, whichever is higher.

Penalty for Insiders Trading: If an insider (1) deals in securities on his behalf or on behalf of others on the basis of an unpublished price sensitive information or (2) communicates any unpublished price sensitive information except as required in the course of business or under any law, or (3) counsels or procures for any person to deal in such securities on the basis of unpublished price sensitive information, he is liable to a penalty not exceeding Rs 5 lakh.

Penalty for Non-disclosure of Acquisition of Shares and Takeovers: Failure to disclose the aggregate of shareholding in a company before acquiring any shares of that company, and also to make a public announcement for acquiring shares at a minimum price is liable to a penalty not exceeding Rs 5 lakh.

Power to Adjudicate: The SEBI is empowered since 1995, to appoint any of its officers of the rank of a division chief as the adjudicating officer, to hold an enquiry in the prescribed manner for determining the amount of penalty on any intermediary. The quantum of penalty is to be fixed with due regard to (1) the amount of disproportionate gain or unfair advantage made as a result of the default, (2) the amount of loss caused to an investor/group of investors as a result of the default and (3) the repetitive nature of the default.