Sebi penalty 14.01.05

Compliances Penalties

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

11 General Powers

a) Promoting / Development / Regulating Securities Market;

b) Regulating the working of Stock Exchange

c) Registering & Regulating Intermediaries;

d) Promoting & Regulating Self-Regulatory Organizations;

e) Prohibiting Fraudulent and Unfair Trade Practices relating to securities;

f) Prohibiting Insider Trading in securities;

g) Regulating substantial acquisition of shares and take over of the Companies;

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.

11A

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.

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.

11B

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.11B

To Investigate

Where the Board has reasonable ground to believe that:

a) Any transaction that are dealt in a manner detrimental to the investors or securities market;

b) 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.

11C

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.

11D

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

15I

15J

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

ApplicabilityListed Companies / Intermediaries / Any other person

15A

Contravention Penalty

Failure to furnish any document, return or report to the Board

Penalty of Rs.1 Lakh Per Day during which such

failure continues or Rs. 1 Crore, whichever is less

File any return or furnish any information, books or other documents within the time specified therefore in the regulations

To maintain books of account or records

ApplicabilityIntermediaries

15B


Failure to enter into an agreement with his client

Penalty of Rs.1 lakh per day during which such failure continues or Rs. 1 crore, whichever is less

ApplicabilityListed Company / Intermediaries

15C


Failure to redress the grievances of investors, after having been called upon by the Board in writing to redress the grievances of investors.


ApplicabilityMutual Funds / Collective Investment Scheme (CIS)

15D


Doing such activity without obtaining certificate of registration, OR fails to comply the conditions specified in the governing regulations


ApplicabilityAsset Management Company

15E


Fails to comply with any of the regulations providing for restrictions on the activities of the asset management companies


ApplicabilityStock Broker

15F


Fails to issue contract notes

Penalty not exceeding 5 times the amount of contract note .

Fails to deliver any security

Penalty of Rs. 1 lakh per day during which such failure continues or Rs. 1 crore , whichever is less

Charges excess brokerage

Penalty of Rs. 1 Lakh or 5 times the amount of brokerage excess charged, whichever is higher.

ApplicabilityAny Insider

15G


Contravention of provisions of Insider Trading Regulations

Penalty of Rs. 25 crore or 3 times the amount of profits made out of such insider trading, whichever is higher.

ApplicabilityAny Acquirer / Person Acting in Concert (PAC)

15H


Contravention of provisions of Takeover Code Regulations

Penalty of Rs. 25 crore or 3 times the amount of profits made out of such failure, whichever is higher.

ApplicabilityListed Companies / Intermediaries / Any Other Person

15HA


Indulgence in any Fraudulent and Unfair Trade Practices.

Penalty of Rs. 25 crore or 3 times the amount of profits made out of such practices, whichever is higher.

ApplicabilityListed Companies / Intermediaries / Any Other Person

15HB


Contravention of any of the provision of the Act where no specific penalty is specified

penalty which may be extend to Rs. 1 Crore

ApplicabilityListed Companies / Intermediaries / Stock Exchanges

Any Other Person

23

Contravention Penalty- 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.

Imprisonment up to10 years OR Fine up to Rs. 25 crore OR Both

ApplicabilityAny Person

23A


(a) Failure by any person to furnish any information, document, books, returns or report to a stock exchange within specified time

Rs. 1 lakh for each day during which such failure

continues OR

Rs. 1 crore Whichever is LESS

(b) Failure by any person to maintain books of accounts or records as per listing agreement or conditions.

ApplicabilityBroker/ Listed Company/Proposed Listed Co.

23C


Failure to redress the grievances of investors after having been called upon by SEBI to do so


continues OR

Rs. 1 crore Whichever is LESS

ApplicabilityListed Company/Collective Investment Scheme/

Mutual Funds

23E


Failure by a company or any person managing collective investment

scheme or mutual fund to comply with Listing / Delisting Conditions

Penalty notexceeding

Rs. 25 crore


23F


Any person dematerialized securities more than the

issued securities OR

delivers unlisted securities in the exchange


Rs. 25 crore

ApplicabilityStock Exchange

23G


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


Rs. 25 crore


19A


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


continues OR

Rs. 1crore, whichever is LESS

ApplicabilityIntermediary Including Depository & DP / Issuer

19B


Failure to enter into agreement required under the Act or any rules or regulations made there under


continues OR


ApplicabilityIntermediary Including Depository & DP / Issuer

19C


Failure to redress the grievances of investors after having been called upon by SEBI to do so


continues OR


ApplicabilityIntermediary / Issuer

19D


Failure to dematerialize or rematerialize the securities within specified time in the Act or regulations or byelaws or abets delay


continues OR


ApplicabilityIntermediary / Issuer

19E


Failure to reconcile the records of de-materialized securities with all the securities issued by the issuer as specified in the regulations


continues OR



19F


Failure to comply with the directions issued by SEBI under section 19 of DP Act 1996, within specified time


continues OR



19G


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

Penalty not exceedingRs. 1 crore

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

Offences for which prosecution can be launched24 Offence Punishment

Non Compliance of any of the provision of the Act, rules or regulations made hereunder.

Imprisonment may extend to 10 Years; or With fine, which may extend to 25 crore rupees, or With Both

Failure to pay the penalty ORFailure to comply with any directions

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

Offences for which prosecution can be launched

23M Offence Punishment

- 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.

Imprisonment may extend to 10 Years; or With fine, which may extend to 25 crore rupees, or With Both

Failure to pay the penalty ORFailure to comply with any directions

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

Offences for which prosecution can be launched

20Offence Punishment

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

Imprisonment up to 10 years ORFine 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 (not less than one month) OR fine up to Rs. 25 crore OR BOTH

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

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

Contravention Noticed

Exparte decisionIf 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

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.

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.

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.

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

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

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.

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.

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.

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.

24A

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.

24B

Sebi penalty 14.01.05

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