Sebi nears finalisation of penalty rationalisation framework for brokers

The Securities and Exchange Board of India’s (Sebi's) steps towards rationalisation of penalties imposed on stock brokers is nearing finalisation.

 

A sub-committee to review the penalties had submitted its suggestions to the market regulator last week, said people aware of the developments.

 

The committee has recommended issuing only warnings instead of penalties if the violations are not serious in nature.

 

Further, the suggestions include segregation of lapses due to technical or operational issues and those which are intentional. In case the lapses are intentional, a more serious action has been recommended.

 

Additionally, only the exchange where the stock broker is a trading member may levy the penalty in a bid to avoid multiple penalties for the same issue.  

 

The committee has also suggested other nomenclature for penalties in cases where the fines are not in the nature of a penalty.

 

“The word penalty can raise certain red flags and enquiries by clients of the stock broker, even if the issue was an operational one. A few suggestions have been submitted on revisiting it,” said a person familiar with the information. 

 

According to sources, Sebi chairman Tuhin Kanta Pandey held a meeting with several broker representatives on Tuesday discussing the issues around penalties and other challenges. He sought detailed notes on the suggestions.

 

Emailed queries to Sebi remained unanswered till the time of going to press.

 

“Overall rationalisation of penalties is necessary, wherein intentional non-compliance needs to be differentiated from operational/technical issues in reporting. It is being worked upon, and this is the understanding we are getting,” said Dhiraj Relli, managing director (MD) and chief executive officer, (CEO) HDFC Securities.

 

Relli added that dedicating one exchange for levying penalty is the right approach. 

 

Otherwise, there are multiple exchanges levying a penalty for the same non-compliance, he said. 

 

Earlier this month, Sebi whole-time member Kamlesh Varshney had stated that the first phase of rationalisation would happen very soon.

 

In a public address, Varshney had stated Sebi was in discussion with the industry standards forum to have a common portal instead of brokers reporting transactions at different exchanges.

 

Further, a dedicated portal for approvals, such as advertisements by the stock brokers, among others, is also in the works. 

Regulatory relook

  *  A panel tasked to review the penality submitted its suggestions last week 

  *  Has recommended a warning be issued for lapses that are not serious 

  *  Segregation of technical or operational lapses from those that are intentional

  *  Only one exchange to penalise non-compliance to avoid multiple actions for the same lapse 

*  Portal to process some approvals for stock brokers after registration