The Securities and Exchange Board of India cannot henceforth let off offenders with mere warnings, as the proposed Securities Laws (Amendment) Bill stipulates minimum penalties to be imposed for offences.

The penalty regime around various securities laws offences, including insider trading, is proposed to be streamlined with the new Securities Laws (Amendment) Bill introducing the concept of minimum penalties. In a sense, the proposed dispensation will ensure that the penalty imposed matches the gravity of the crime committed.

Discretion to impose

While imposing monetary penalties, adjudicating officers will now have the discretion to impose minimum penalties, which will not be less than ₹1 lakh for most offences and not less than ₹10 lakh for insider trading and non-disclosure. The concept of minimum penalty will help in the settlement of cases where the profits are very small or the nature of violations are not very grave, say experts.

Under the proposed regime, in the case of violation of insider trading norms, SEBI can, if the Bill gets passed, levy a penalty of a minimum ₹10 lakh, extending up to ₹25 crore or three times the unlawful profits, whichever is higher.

The current SEBI Act stipulates a penalty of ₹25 crore or three times the profits, whichever is higher. “In the current law, the penalty has been specified. There is no question of discretion and it has been set at a minimum of ₹25 crore. Now that is proposed to be altered and adjudicating officers will have flexibility in deciding the level of penalty — with the minimum penalty for insider trading being ₹10 lakh,” said a former SEBI whole-time member.

The latest move to streamline the penalty regime should be seen as one reining in the discretion of adjudicating officers and not as one giving them complete freedom. There is no liberalisation, but only streamlining, sources said.

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