Sebi Complainces Penalties

1. Compliances
Penalties

2. Laws Regulating Capital Markets
Companies Act, 1956 SCR Act, 1956 SEBI Act, 1992
Public Ltd Co’s Stock Exchanges Intermediaries
Listed Co’s Listed Co’s
Self Regulatory Org
Depositories Act 1996
NSDL
CDSL
DP’s/ RTA
Listed Co’s

3. 11
GENERAL POWERS
•Promoting / Development / Regulating Securities Market;
•Regulating the working of Stock Exchange
•Registering & Regulating Intermediaries;
•Promoting & Regulating Self-Regulatory Organizations;
•Prohibiting Fraudulent and Unfair Trade Practices relating to
securities;
•Prohibiting Insider Trading in securities;
•Regulating substantial acquisition of shares and take over of the
Companies;

4. 11
General Powers Contd..Power to make orders for :
•suspension of trading in any security;
•restraining to access the market & prohibit any person to sell,
buy, deal in securities;
•suspend any office bearer of a Stock Exchange and Self
Regulatory Organization from holding such position;
•Impound and retain the proceeds and securities in respect of any
transaction under investigation.
_____________________________________________________________
_
•RECOMMENDATIONS: SEBI empowered to ask for
the information from the Professionals in their course
of dealings in securities transactions

5. 11
A
Relating to Issue of Securities
In order to protect the investors it has the powers :
•Matters relating to issue of capital, transfer of securities and
other incidental matters;
•Manner how the disclosures have to be made by companies;
•Prohibit any company from issuing prospectus, any offer
document or advertisement soliciting money from public for
issue of securities. specify the conditions based on which the
prospectus may be issued
•Specify the requirements of listing, transfer of securities and
other matters incidental thereto.

6. To Issue Directions
If after making or causing to be made an enquiry, the board
is satisfied that it is necessary-
In the interest of investors, or orderly development of
securities market; or
To prevent the affairs which are detrimental to the interest
of investors or securities market.
To secure the proper management of such intermediary or
person.

11
B

7. It may issue such directions which are in the interest of the
investors and securities market.
 to any Intermediary, person or class of persons
associated with the securities market;
 to any company in respect of matter specified in
section 11A.
To Issue Directions Contd.11
B

8. To Investigate
Where the Board has reasonable ground to believe that:
•Any transaction that are dealt in a manner detrimental to the
investors or securities market;
•Intermediary violates any provision of the Act, rules,
regulations made under it or any order passed by the
chairman.
It may Direct any person to investigate the affairs of such
intermediaries or any other person concerned and to report
thereon to the Board.
11
C

9. To Cease and Desist the Proceedings
The board may pass cease & desist order in the following case:
•Where any provision of the Act, rules and regulations has been
violated or is likely to be violated.
•In case of insider trading or market manipulation.
11
D

10. Adjudication Powers
For the purpose of adjudging under sections 15A - 15HB,
the Board appoints any of its officer not below the rank of
Divisional Chief to be an adjudicating officer for holding
an inquiry,
after giving any person concerned a reasonable
opportunity of being heard for the purpose of imposing
any penalty. 
Governed by SEBI (Procedure of Holding Enquiry &
Imposing Penalty by Adjudicating Officer) Rules, 1995
15
I

11. 15
J
Factors to be taken care by Adjudication Officer
While adjudicating the quantum of penalty under section
15-I, the adjudicating officer shall take care of following
factors :
the quantum of disproportionate gain or unfair advantage,
wherever quantifiable, made as a result of the default;
The amount of loss caused to an investor or group of
investors as a result of the default. 
The repetitive nature of default

12. 15
JAdministrative proceedings Administrative proceedings
Monetary penalty proceedingsMonetary penalty proceedings
Disciplinary proceedingsDisciplinary proceedings
ProsecutionProsecution
Civil litigationCivil litigation

13. 15
J
Issue related manipulations , mis-statement in Issue related manipulations , mis-statement in
prospectus, gray market operations and prospectus, gray market operations and
irregularities in the issue process irregularities in the issue process
Post listing market manipulations like price Post listing market manipulations like price
rigging, circular tradingrigging, circular trading
Insider tradingInsider trading
Manipulations relating to takeovers and Manipulations relating to takeovers and
acquisitionsacquisitions
Other violations of provisions of SEBI Act / Other violations of provisions of SEBI Act /
RegulationsRegulations
Enforcement actions by SEBI becomes Enforcement actions by SEBI becomes
necessary in cases ofnecessary in cases of : :

14. LISTED COMPANIES / INTERMEDIARIES / ANY OTHER
PERSON
Applicability15
A
To maintain books of account or
records
File any return or furnish any
information, books or other
documents within the time
specified therefore in the
regulations
Penalty of Rs.1 Lakh Per Day
during which such failure
continues or Rs. 1 Crore,
whichever is less
Failure to furnish any document,
return or report to the Board
PenaltyContravention

15. INTERMEDIARIES
Applicability15
B
Penalty of Rs.1 lakh per day
during which such failure
continues or Rs. 1 crore,
whichever is less
Failure to enter into an
agreement with his client
PenaltyContravention

16. LISTED COMPANY / INTERMEDIARIES
Applicability15
C
Penalty of Rs.1 lakh per day
during which such failure
continues or Rs. 1 crore,
whichever is less
Failure to redress the grievances
of investors, after having been
called upon by the Board in
writing to redress the
grievances of investors.
PenaltyContravention

17. MUTUAL FUNDS / COLLECTIVE INVESTMENT SCHEME (CIS)
Applicability15
D
Penalty of Rs.1 lakh per day
during which such failure
continues or Rs. 1 crore,
whichever is less
Doing such activity without
obtaining certificate of
registration, OR fails to comply
the conditions specified in the
governing regulations
PenaltyContravention

18. ASSET MANAGEMENT COMPANY
Applicability15
E
Penalty of Rs.1 lakh per day
during which such failure
continues or Rs. 1 crore,
whichever is less
Fails to comply with any of the
regulations providing for
restrictions on the activities of
the asset management
companies
PenaltyContravention

19. STOCK BROKER
Applicability15
F
Penalty of Rs. 1 Lakh or 5 times
the amount of brokerage excess
charged, whichever is higher.
Charges excess brokerage
Penalty of Rs. 1 lakh per day
during which such failure
continues or Rs. 1 crore ,
whichever is less
Fails to deliver any security
Penalty not exceeding 5 times the
amount of contract note .
Fails to issue contract notes
PenaltyContravention

20. ANY INSIDER
Applicability15
G
Penalty of Rs. 25 crore or 3 times
the amount of profits made out of
such insider trading, whichever
is higher.
Contravention of provisions of
Insider Trading Regulations
PenaltyContravention

21. ANY ACQUIRER / PERSON ACTING IN CONCERT (PAC)
Applicability15
H
Penalty of Rs. 25 crore or 3 times
the amount of profits made out of
such failure, whichever is higher.
Contravention of provisions of
Takeover Code Regulations
PenaltyContravention

22. LISTED COMPANIES / INTERMEDIARIES / ANY OTHER
PERSON
Applicability15
HA
Penalty of Rs. 25 crore or 3 times
the amount of profits made out of
such practices, whichever is
higher.
Indulgence in any Fraudulent
and Unfair Trade Practices.
PenaltyContravention

23. LISTED COMPANIES / INTERMEDIARIES / ANY OTHER
PERSON
Applicability
15
HB
penalty which may be extend to
Rs. 1 Crore
Contravention of any of the
provision of the Act where no
specific penalty is specified
PenaltyContravention

24. LISTED COMPANIES / INTERMEDIARIES / STOCK
EXCHANGES ANY OTHER PERSON
Applicability23
Imprisonment up to
10 years
OR
Fine up to Rs. 25 crore
OR
Both
- trades in contraventions
of various sections of the
Act,
- operating non-
recognized exchanges,
- non-compliance with the
orders of SAT,
- non-compliance with the
conditions of listing etc.
PenaltyContravention

25. ANY PERSON
Applicability23
A
(b) Failure by any person to
maintain books of accounts or
records as per listing agreement
or conditions.
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1 crore
Whichever is LESS
(a) Failure by any person to
furnish any information,
document, books, returns or
report to a stock exchange within
specified time
PenaltyContravention

26. BROKER/ LISTED COMPANY/PROPOSED LISTED CO.
Applicability23
C
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1 crore
Whichever is LESS
Failure to redress the grievances
of investors after having been
called upon by SEBI to do so
PenaltyContravention

27. LISTED COMPANY/COLLECTIVE INVESTMENT SCHEME/
MUTUAL FUNDS
Applicability23
E
Penalty not
exceeding
Rs. 25 crore
Failure by a company or any
person managing collective
investment scheme or mutual
fund to comply with Listing /
Delisting Conditions
PenaltyContravention

28. ANY PERSON
Applicability23
F
Penalty not
exceeding
Rs. 25 crore
Any person dematerialized
securities more than the issued
securities
OR
delivers unlisted securities in the
exchange
PenaltyContravention

29. STOCK EXCHANGE
Applicability23
G
Penalty not
exceeding
Rs. 25 crore
Failure or neglect by an exchange
to furnish periodical returns to
SEBI
OR
make or amend its rules/byelaws
as directed by SEBI
OR
comply with directions of SEBI
PenaltyContravention

30. ANY PERSON
Applicability19
A
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1crore,
whichever is LESS
a). Failure to furnish any
information, document, books,
returns or report to SEBI
b). Failure to file any return or
furnish any information, books
or other documents under the
Act
c). Failure to maintain books of
accounts or records
PenaltyContravention

31. INTERMEDIARY INCLUDING DEPOSITORY & DP / ISSUER
Applicability19
B
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1crore,
whichever is LESS
Failure to enter into agreement
required under the Act or any
rules or regulations made there
under
PenaltyContravention

32. INTERMEDIARY INCLUDING DEPOSITORY & DP / ISSUER
Applicability19
C
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1crore,
whichever is LESS
Failure to redress the grievances
of investors after having been
called upon by SEBI to do so
PenaltyContravention

33. INTERMEDIARY / ISSUER
Applicability19
D
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1crore,
whichever is LESS
Failure to dematerialize or
rematerialize the securities
within specified time in the Act
or regulations or byelaws or abets
delay
PenaltyContravention

34. INTERMEDIARY / ISSUER
Applicability19
E
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1crore,
whichever is LESS
Failure to reconcile the records of
de-materialized securities with
all the securities issued by the
issuer as specified in the
regulations
PenaltyContravention

35. ANY PERSON
Applicability19
F
Rs. 1 lakh for each day during
which such failure continues
OR
Rs. 1crore,
whichever is LESS
Failure to comply with the
directions issued by SEBI under
section 19 of DP Act 1996, within
specified time
PenaltyContravention
RECO:“not exceeding one lac rupees for each day during which such failure
continues subject to a maximum of one crore rupees”, for the sake of clarity.

36. ANY PERSON
Applicability19
G
Penalty not
exceeding
Rs. 1 crore
Failure to comply with any
provision of the Act, the rules or
regulations or byelaws made or
directions issued by SEBI there
under for which no separate
penalty has been provided
PenaltyContravention
RECO: Section 15HB of SEBI Act, may be amended to provide for monetary penalty
for the failure to comply with the orders of SEBI and to amend section 24 (2) to make
noncompliance of SEBI order an offence under the provisions of the said section.

37. Independent of penalty imposed by Adjudicating
Officer under the Acts.
Authority not lower than Session Court.
The complaint should be filed within the period
of Limitation under Limitation Act, 1963

38. Offences for which prosecution can be launched
24
 Imprisonment not less than 1
month but may extend to 10
Years; or
 With fine, which may extend
to 25 crore rupees, or
 With Both
Failure to pay the penalty
OR
Failure to comply with any
directions
 Imprisonment may extend to
10 Years; or
 With fine, which may extend
to 25 crore rupees, or
 With Both
Non Compliance of any of the
provision of the Act, rules or
regulations made hereunder.
PunishmentOffence

39. Offences for which prosecution can be launched23
M
 Imprisonment not less than 1
month but may extend to 10
Years; or
 With fine, which may extend
to 25 crore rupees, or
 With Both
Failure to pay the penalty
OR
Failure to comply with any
directions
 Imprisonment may extend to
10 Years; or
 With fine, which may extend
to 25 crore rupees, or
 With Both
- Non Compliance of any of the
provision of the Act
- Non-Compliance of any of the
provision for which no
punishment is provided
elsewhere in this Act.
PunishmentOffence

40. Offences for which prosecution can be launched20
Imprisonment up to 10 years (not
less than one month)
OR
fine up to Rs. 25 crore
OR BOTH
Failure to pay the penalty
imposed by adjudicating officer
or to comply with any of his
directions or orders
Imprisonment up to 10 years
OR
Fine up to Rs. 25 crore
OR BOTH
Contravenes or attempts to
contravene or abets the
contravention of the provisions
of the Act or of any rules or
regulations or byelaws made
there under
PunishmentOffence

41. 27
Contravention: Non-compliance any of the provisions of Acts,
rules or regulations made hereunder.
 Applicability:
a.) Every person in charge of and responsible to, the
company, at the time the offence,
b.) Where it is proved that the offence has been
committed with the consent or connivance of, or
is attributable to any neglect on the part of, any
director, manager, secretary or other officer of
the company, every such person.
Exclusion: Person proves that the offence was
committed without his knowledge or that he had
exercised all due diligence to prevent the
commission  

42. Holding inquiry for any contravention by intermediaries
Governed by SEBI (Procedure for Holding Enquiry by
Enquiry Officer and Imposing Penalties) Regulations, 2002.
Regulations 4 specifies the regulations, contravention of
which, activates the enquiry proceedings.
APPLICABLE ONLY TO INTERMEDIARIES

43. Contravention
Noticed

Exparte decision
If no response
SCN to Party
Party to file
Reply
Appointment of
Enquiry Officer
Notice Issued
Reply within
15 days
Hearing Date
Fixed
Enquiry Report
by EO
Representation
Before EO
Order by
Chairman
Impose Minor or
Major Penalty
For contravention of the provision
of regulations mentioned in Reg 4

44. Minor Penalties
Warning or censure;
Prohibition to undertake any new assignment for a period of
six months;
Debarring from carrying out the activities as
intermediaries for a period upto six months.
Suspension of certificate of registration for a period upto 3
months.

45. Major Penalties
 Cancellation of certificate of registration;
 Prohibition to undertake any new assignment for a
period exceeding six months;
 Suspension of certificate of registration for a period
exceeding three months;
 Debarring from carrying out the activities as
intermediaries for a period exceeding six months.

46. Major Penalties ONLY to be imposed where:
The contravening party has been guilty of:
 Price or market manipulation of any scrip, index or of
insider trading;
 Violation of conditions of registrations;
 Failure to obey directions OR failure to comply with the
monetary penalty;
 Repeated offence by an intermediary.

47. Appeals can be made in following cases:
Orders passed by SEBI (after Securities Laws amendment
Act, 1999)
OR
Orders passed by an adjudicating officer
OR
Refusal, Omission or failure of Stock Exchange to list the
securities

48. Time limit for filing appeal:
In case of orders of SEBI or adjudicating officer, within 45
days from the date on which copy of order is received.
AND
In case of Stock Exchange refusal, failure or omission within
15 days of specified date of section 73(1A) of the Companies
Act, 1956

49. Appearance before SAT
Any person aggrieved by the orders can either appear in person
or authorize the following persons to appear before SAT:
Chartered Accountant or;
Company Secretary or;
Cost Accountant or;
Legal practitioner or;
Any of its officers.

50. Bar of Jurisdiction of Civil Courts:
EXCEPT for the appeals to SAT under section 15 T of or to
Central Government under section 20
No civil court shall have the jurisdiction to entertain any
matter which the Board or the adjudicating officer is
empowered to act
And
No injunction shall be granted by any court or authority in
respect of any action taken or in pursuance of any order
passed by the Board or the adjudicating officer.

51. Appeal to Supreme Court:
Aggrieved by the decision of or order of SAT or for
determining any question of law arising out of the order,
Appeal can be filed to Supreme Court within 60 days of the
date of communication of the decision or order of SAT.

52. Offences can be compounded subject to following conditions :
·The offence must not be punishable with Imprisonment only or with
imprisonment and fine under SEBI Act ,
·The offences can be compounded either before or after the institution of
proceedings,
·The offence can be compounded by SAT or by the Court under which the
proceedings are pending,
·The provision of SEBI Act shall be applicable notwithstanding any thing
stated in Criminal Procedure Code.
24
A
RECO: its been recommended that the said section may be amended to
provide for compounding of all violations and not only offences, on the lines of
provisions contained in Section 279 (2) of Income Tax Act 1961 .

53. Special Powers to grant immunity from Penalty

·Can be granted by Central Government
·Where the alleged person gives a full and true disclosure in
respect of the alleged violation
·Central government imposes such conditions as it may think
fit.
·No immunity granted where the prosecution has already been
instituted.
·Immunity once granted can be withdrawn on non compliance
of any condition imposed or giving of false evidence.
24
B

54. Recent Judgements
‘Can penal laws be Retrospective?’ –NO
1. According to the Article 20 (1) of the Constitution:
2. Decision in the cases of
•Rameshchandra Manshukani NRI vs Adjudicating
Officer, SEBI -Appeal No. 151/2004
•DSQ Holdings
“Penalties unless specifically made retrospectively must
inevitable be only with effect from the date of the
amendment.
RECOS: SEBI be empowered to make regulation with respect to
retrospective effect in the matter relating to charging of fees or
procedural matters for the limited purpose of giving relief and not
for imposing new liabilities and obligations.