SEBI Enforcement and Appeals

In one line

The SEBI Act enforces itself through a graded set of money penalties adjudicated by an officer or by the Board on stated factors, a settlement mechanism that closes proceedings without appeal, an appeal to the Securities Appellate Tribunal within forty-five days and to the Supreme Court on a question of law within sixty, and a criminal offence of contravention carrying up to ten years.

In exam wording: under section 15T(1) any person aggrieved by an order of the Board made under this Act or the rules or regulations, or by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter, within forty-five days of receiving a copy of the order.

Why the law has this at all

A securities regulator that could only prosecute would be useless. Market misconduct is committed quickly, is proved by documents and trading records rather than by witnesses, and produces gains that must be taken away rather than merely punished. A criminal trial is too slow for the first, too demanding in its standard of proof for the second, and does nothing about the third.

So Chapter VIA builds a civil enforcement system in four layers, and it is worth naming the layers before reciting the sections.

Penalties, in ss.15A to 15HB, fixed by subject matter, each with a floor and a ceiling and, in the serious ones, a ceiling expressed as a multiple of the profits so that a large gain cannot absorb the penalty as a cost.

Adjudication, in s.15-I, by an officer not below the rank of a Division Chief, after an inquiry with a reasonable opportunity of being heard, with the Board able to call for and examine the record and to enhance the penalty.

Settlement, in s.15JB, by which a person may buy an end to proceedings without admission or appeal.

Appeal, in s.15T and s.15Z, to a specialist tribunal and then, on a question of law, to the Supreme Court.

Behind all four sits the criminal offence in s.24, which is available for a contravention of the Act or of any rule or regulation, without prejudice to any award of penalty.

Sections 15A to 15HB: the penalty scheme

The chapter contains a long list of penalties keyed to particular defaults. Three are enough to show its shape and are the three most likely to be examined.

15A: failure to furnish information, return or report. A person required under the Act, rules or regulations to furnish any document, return or report to the Board who fails to furnish it, or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents, is liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues, subject to a maximum of one crore rupees.