Sebi to ask Govt to amend laws for clearer penalty provisions

For greater clarity on determining monetary penalty for violations in capital markets, Sebi today decided to approach the government seeking amendments in the laws governing the securities markets.
The board's approval to seek the amendments comes after the Supreme Court recently rejected the regulator's plea that an adjudicating officer has discretion to fix the penalty amount under a particular provision of the Sebi Act.
In 2014, amendments to the Securities and Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956 and Depositories Act, 1996, providing for minimum monetary penalties and discretion to impose appropriate penalty by the adjudicating officer.

According to Sebi, the changes were prospective and not applicable to cases between 2002 and 2014.
In the matter of Roofit Industries, the regulator had challenged Securities Appellate Tribunal's decision to reduce the fine amount. While rejecting the plea, the Supreme Court did not accept that "section 15J (of the Sebi Act) gives discretion to adjudicating officers" to decide the penalty quantum.
"Pursuant to the judgement of the Supreme Court in the matter of Roofit Industries Ltd, a need arose for clarifying the monetary penalty provisions in the securities laws, relating to cases prior to 2014," Sebi said in a release after the board meeting here today.

In this respect, the board has approved sending a proposal to the central government for amendments in the laws, it added.

The Supreme Court, in the order passed in November 2015, had concluded that when section 15A (a) of Securities And Exchange Board of India Act, 1992 (Sebi Act) is read along with provision of section 15 J (factors to be taken into account by adjudicating officer), then there is no scope for discretion.
Under these provisions, the fine has to be either Rs 1 lakh for each day of violation or Rs 1 crore, whichever is less. Violations exceeding 100 days would attract Rs 1 crore penalty.

Earlier, a senior official had said that following the Supreme Court ruling, the SAT has remanded back several orders of Sebi for passing fresh orders causing delays in disposal appeals.
As many as 36 cases have been remanded back to Sebi for passing fresh orders by the tribunal. Also, around 3,000 adjudication actions remain pending as on March this year, of which 90 per cent pertain to the period between 2002 and 2014, the official had said.