The finance ministry and the department of company affairs (DCA) have agreed to permit the Securities and Exchange Board of India (Sebi) to levy a penalty of Rs 1 lakh a day, or a maximum fine of Rs 1 crore, whichever is lower, for most capital market-related offences.
According to the Cabinet note prepared by the finance ministry and agreed upon by the DCA, Sebi may impose a fine of up to Rs 25 crore only in case of offences relating to fraud and insider trading. Official sources said the note, which was part of the amendments to the Sebi Act, was finalised recently.
The offences include default by brokers, failure to furnish returns and information by corporates and brokers, and other violations under Sections 15 A, B, C, E and F of the Sebi Act.
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The finance ministry had earlier proposed that Sebi should be allowed to levy a penalty of Rs 10 lakh a day in case of default by a broker and Rs 5 lakh a day for failure to furnish information and returns. However, the law ministry objected to this, saying the penalty was too high.
In case of insider trading and frauds, the finance ministry maintained that the penalty was not very high, pointing out that the US Securities and Exchange Commission also levied a penalty of $500,000.
An increase in the penalties levied by Sebi was sought by the finance ministry to give more teeth to the capital market regulator. As part of the amendments to the Sebi Act, the government also proposes to give limited search and seizure powers to the regulator, and increase the strength of its board. The amendment Bill is proposed to be moved in the monsoon session of Parliament.