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Sebi Complainces Penalties

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  • 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. Powers & Functions of SEBI 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. Powers & Functions of SEBI 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. Powers & Functions of SEBI 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. Powers & Functions of SEBI 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.
    Powers & Functions of SEBI To Issue Directions Contd. 11 B
  • 8. Powers & Functions of SEBI 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. Powers & Functions of SEBI 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. Powers & Functions of SEBI 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. Powers & Functions of SEBI 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. Types of Enforcement actions taken by SEBI 15 J
    • Administrative proceedings
    • Monetary penalty proceedings
    • Disciplinary proceedings
    • Prosecution
    • Civil litigation
  • 13. 15 J
      • Issue related manipulations , mis-statement in prospectus, gray market operations and irregularities in the issue process
      • Post listing market manipulations like price rigging, circular trading
      • Insider trading
      • Manipulations relating to takeovers and acquisitions
      • Other violations of provisions of SEBI Act / Regulations
    Enforcement actions by SEBI becomes necessary in cases of :
  • 14. 15 A Penalities under SEBI Act, 1992 LISTED COMPANIES / INTERMEDIARIES / ANY OTHER PERSON Applicability 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 Penalty Contravention
  • 15. 15 B Penalities under SEBI Act, 1992 INTERMEDIARIES Applicability 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 Penalty Contravention
  • 16. 15 C Penalities under SEBI Act, 1992 LISTED COMPANY / INTERMEDIARIES Applicability 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. Penalty Contravention
  • 17. 15 D Penalities under SEBI Act, 1992 MUTUAL FUNDS / COLLECTIVE INVESTMENT SCHEME (CIS) Applicability 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 Penalty Contravention
  • 18. 15 E Penalities under SEBI Act, 1992 ASSET MANAGEMENT COMPANY Applicability 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 Penalty Contravention
  • 19. 15 F Penalities under SEBI Act, 1992 STOCK BROKER Applicability 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 Penalty Contravention
  • 20. 15 G Penalities under SEBI Act, 1992 ANY INSIDER Applicability 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 Penalty Contravention
  • 21. 15 H Penalities under SEBI Act, 1992 ANY ACQUIRER / PERSON ACTING IN CONCERT (PAC) Applicability 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 Penalty Contravention
  • 22. 15 HA Penalities under SEBI Act, 1992 LISTED COMPANIES / INTERMEDIARIES / ANY OTHER PERSON Applicability 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. Penalty Contravention
  • 23. 15 HB Penalities under SEBI Act, 1992 LISTED COMPANIES / INTERMEDIARIES / ANY OTHER PERSON Applicability penalty which may be extend to Rs. 1 Crore Contravention of any of the provision of the Act where no specific penalty is specified Penalty Contravention
  • 24. 23 Penalities under SCR Act, 1956 LISTED COMPANIES / INTERMEDIARIES / STOCK EXCHANGES ANY OTHER PERSON Applicability 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.
    Penalty Contravention
  • 25. 23 A Penalities under SCR Act, 1956 ANY PERSON Applicability (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 Penalty Contravention
  • 26. 23 C Penalities under SCR Act, 1956 BROKER/ LISTED COMPANY/PROPOSED LISTED CO. Applicability 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 Penalty Contravention
  • 27. 23 E Penalities under SCR Act, 1956 LISTED COMPANY/COLLECTIVE INVESTMENT SCHEME/ MUTUAL FUNDS Applicability 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 Penalty Contravention
  • 28. 23 F Penalities under SCR Act, 1956 ANY PERSON Applicability Penalty not exceeding Rs. 25 crore Any person dematerialized securities more than the issued securities OR delivers unlisted securities in the exchange Penalty Contravention
  • 29. 23 G Penalities under SCR Act, 1956 STOCK EXCHANGE Applicability 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 Penalty Contravention
  • 30. 19 A Penalities under Depositories Act, 1996 ANY PERSON Applicability 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 Penalty Contravention
  • 31. 19 B Penalities under Depositories Act, 1996 INTERMEDIARY INCLUDING DEPOSITORY & DP / ISSUER Applicability 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 Penalty Contravention
  • 32. 19 C Penalities under Depositories Act, 1996 INTERMEDIARY INCLUDING DEPOSITORY & DP / ISSUER Applicability 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 Penalty Contravention
  • 33. 19 D Penalities under Depositories Act, 1996 INTERMEDIARY / ISSUER Applicability 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 Penalty Contravention
  • 34. 19 E Penalities under Depositories Act, 1996 INTERMEDIARY / ISSUER Applicability 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 Penalty Contravention
  • 35. 19 F Penalities under Depositories Act, 1996 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. ANY PERSON Applicability 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 Penalty Contravention
  • 36. 19 G Penalities under Depositories Act, 1996 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. ANY PERSON Applicability 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 Penalty Contravention
  • 37. Prosecution under SEBI SCRA & DP Act.
    • 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. 24 Offences under SEBI Act, 1992 Offences for which prosecution can be launched
    • 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. Punishment Offence
  • 39. 23 M Offences under SCR Act, 1992 Offences for which prosecution can be launched
    • 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. Punishment Offence
  • 40. 20 Offences under DP Act, 1996 Offences for which prosecution can be launched 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 Punishment Offence
  • 41. 27 Offences by Companies under SEBI, SCRA, DP Act
    • 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 Enquiry & Imposing Penality 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. Holding Enquiry & Imposing Penality 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. Types of Penality 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. Types of Penality 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. Types of Penality 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 To Securities Appellate Tribunal (SAT) 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. Appeals To Securities Appellate Tribunal (SAT) 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. Appeals To Securities Appellate Tribunal (SAT) 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. Appeals To Securities Appellate Tribunal (SAT) 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. Appeals To Securities Appellate Tribunal (SAT) 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. Composition of Offences
    • 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. Power to Grant Immunity 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.
  • 55. Thanks