Sebi Complainces Penalties
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Transcript of Sebi Complainces Penalties
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.
______________________________________________________________
• RECOMMENDATIONS: SEBI empowered to ask for the information from the Professionals in their course of dealings in securities transactions
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
15J
Administrative Administrative proceedings proceedings
Monetary penalty Monetary penalty proceedingsproceedings
Disciplinary proceedingsDisciplinary proceedings ProsecutionProsecution Civil litigationCivil litigation
15J
Issue related manipulations , mis-Issue related manipulations , mis-statement in prospectus, gray market statement in prospectus, gray market operations and irregularities in the operations and irregularities in the issue process issue process
Post listing market manipulations like Post listing market manipulations like price rigging, circular tradingprice rigging, circular trading
Insider tradingInsider trading
Manipulations relating to takeovers Manipulations relating to takeovers and acquisitionsand acquisitions
Other violations of provisions of SEBI Other violations of provisions of SEBI Act / RegulationsAct / Regulations
Enforcement actions by SEBI Enforcement actions by SEBI becomes becomes necessary in cases ofnecessary in cases of : :
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
Contravention Penalty
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
Contravention Penalty
Failure to redress the grievances of investors, after having been called upon by the Board in writing to redress the grievances of investors.
Penalty of Rs.1 lakh per day during which such failure continues or Rs. 1 crore, whichever is less
ApplicabilityMUTUAL FUNDS / COLLECTIVE INVESTMENT SCHEME
(CIS)
15D
Contravention Penalty
Doing such activity without obtaining certificate of registration, OR fails to comply the conditions specified in the governing regulations
Penalty of Rs.1 lakh per day during which such failure continues or Rs. 1 crore, whichever is less
ApplicabilityASSET MANAGEMENT COMPANY
15E
Contravention Penalty
Fails to comply with any of the regulations providing for restrictions on the activities of the asset management companies
Penalty of Rs.1 lakh per day during which such failure continues or Rs. 1 crore, whichever is less
Applicability
STOCK BROKER15F
Contravention PenaltyFails 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.
Applicability
ANY INSIDER15G
Contravention Penalty
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 Penalty
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
Contravention Penalty
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.
Applicability
LISTED COMPANIES / INTERMEDIARIES / ANY OTHER PERSON
15HB
Contravention Penalty
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
Contravention Penalty
(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
Contravention Penalty
Failure to redress the grievances of investors after having been called upon by SEBI to do so
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1 crore Whichever is LESS
ApplicabilityLISTED COMPANY/COLLECTIVE INVESTMENT SCHEME/
MUTUAL FUNDS
23E
Contravention Penalty
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
ApplicabilityANY PERSON
23F
Contravention Penalty
Any person dematerialized securities more than the
issued securities OR
delivers unlisted securities in the exchange
Penalty notexceeding
Rs. 25 crore
ApplicabilitySTOCK EXCHANGE
23G
Contravention Penalty
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
Penalty notexceeding
Rs. 25 crore
ApplicabilityANY PERSON
19A
Contravention Penalty
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
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1crore, whichever is LESS
ApplicabilityINTERMEDIARY INCLUDING DEPOSITORY & DP / ISSUER
19B
Contravention Penalty
Failure to enter into agreement required under the Act or any rules or regulations made there under
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1crore, whichever is LESS
ApplicabilityINTERMEDIARY INCLUDING DEPOSITORY & DP / ISSUER
19C
Contravention Penalty
Failure to redress the grievances of investors after having been called upon by SEBI to do so
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1crore, whichever is LESS
ApplicabilityINTERMEDIARY / ISSUER
19D
Contravention Penalty
Failure to dematerialize or rematerialize the securities within specified time in the Act or regulations or byelaws or abets delay
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1crore, whichever is LESS
ApplicabilityINTERMEDIARY / ISSUER
19E
Contravention Penalty
Failure to reconcile the records of de-materialized securities with all the securities issued by the issuer as specified in the regulations
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1crore, whichever is LESS
ApplicabilityANY PERSON
19F
Contravention Penalty
Failure to comply with the directions issued by SEBI under section 19 of DP Act 1996, within specified time
Rs. 1 lakh for each day during which such failure
continues OR
Rs. 1crore, whichever is LESS
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.
ApplicabilityANY PERSON
19G
Contravention Penalty
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
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.
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
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 .
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
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.