The Securities & Exchange Board of India (Sebi) on Friday issued a circular reducing the total 235 existing penalties for them to 90 and said the second phase of Samuhik Prativedan Manch, a technology based common reporting mechanism will be implemented from October 15.
Penalties on 40 violations have been removed and 105 minor procedural lapses has been termed as ‘financial-disincentives’, Sebi said. Of the revised number of penalties, 36 have been rationalised, seven replaced with advisory/warning for first-time offences, six capped, and 12 new penalties introduced.
The revised penalty framework shall also be made applicable to ongoing enforcement proceedings providing major relief to stock broking community, the circular said and added that rationalised penalty framework shall facilitate ease of doing business and ease of compliance for stock brokers.
Sebi said the revised penalty framework aims to remove inconsistencies in the nature and quantum of penalties across exchanges for the same type of observation; avoid imposition of penalty by multiple exchanges by ensuring that penalties will be levied by a lead exchange only for violations common across exchanges adopt the terminology ‘financial disincentive’ in place of ‘penalty’ for procedural lapses/technical errors to avoid unnecessary reputational impact on stock brokers.
On common reporting mechanism, Sebi said it was implemented with effect from August 01 to reduce the compliance cost for stock brokers. In the first phase, submission of 40 compliance reports was operationalised, it said adding the second phase would be implemented from October 15, 2025 with operationalisation of 30 additional compliance reports.
Both NSE and BSE issued circulars on the same on Friday with a list of violations / non-compliances, their classification and the corresponding prescribed actions, approved by SEBI. Contraventions such as passing on short reporting penalty without intimating clients with relevant supporting, daily margin statement issued with material discrepancies, and contract notes issued with material discrepancies have been named financial disincentives actions on these will be taken on the basis of number of instances.
While in cases of material violations such as net worth shortfall / incorrect reporting of net worth to the exchange resulting to shortfall will be charged monetary penalty of 5% of the amount of shortfall from the required net worth and misuse of client securities / commodities will be charged 2% of amount of misuse, subject to maximum penalty of Rs.1 lakh.