Securities & Exchange Board 13

of India Act, 1992

Applicability and Commencement

✓ This SEBI Act deemed to have come into force on the 30th day of January, 1992
✓ and extended to whole of India as per section 1 of the SEBI Act, 1992.

Objectives of the Act

✓ Protecting the interests of the investors in securities

✓ Promoting fair dealings and the development of, and
✓ Regulating, the securities market and for matters connected therewith or incidental
thereto.

Establishment of the
Securities and Exchange Board of India
Section 3
SEBI (hereinafter called 'the Board') has been established as-
✓ a body corporate
✓ having perpetual succession and a common seal,
✓ with powers to acquire, hold and dispose of property, both movable and immovable, and
✓ to contract as also to sue or be sued by the name of SEBI.

Office of Board

✓ The head office of the Board shall be at Mumbai.

✓ Board may establish offices at other places in India.

Management of Board
Section 4
Composition

✓ Chairman (nominated by Union Government of India)

✓ 2 Members(Officers from Ministry of Finance and Ministry of Corporate Affairs)
✓ 1 member (From RBI)
✓ 5 other members (nominated by Union Government of India), out of them at least 3
shall be whole-time members

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.2

Powers in Board

The general superintendence, direction and management of the affairs of the Board shall vest in
a Board of Members, which may exercise all powers and do all acts and things, which may be
exercised or done by the Board.

Terms of Service
Section 5
✓ The term of office and other conditions of service of Chairman and other Members of the
Board shall be such as may be prescribed by rules made under the Act.
✓ Chairman and Whole time Members may hold office for a period of five years
subject to the maximum age limit of 65 years and can be re-appointed by the Central
Government.
✓ A part-time member may also hold office for a maximum of three years but there is no
age limit.

Termination of Service by Central Government

The Central Government will have the right to terminate the services of the Chairman or
other members appointed to the Board at any time before the expiry of their tenure-
✓ by giving not less than three months’ notice in writing, or
✓ three months‘ salary and allowance in lieu thereof.

Relinquishment of Office

The Chairman and other members shall have the right to relinquish office at any time
before the expiry of their tenure by giving a notice of three months in writing to the
Central Government.

Removal of Members of the Board

Section 6
The Central Government shall have the power to remove a member or the Chairman
appointed to the Board, if he:
✓ at any time has been adjudicated as insolvent
✓ has been declared by a competent court to be of unsound mind
✓ has been convicted of an offence which in the opinion of the Central Government,
involves a moral turpitude.
✓ has in the opinion of the Central Government so abused his position as to render his
continuance in office detrimental to the public interest.

Before removing a member or the Chairman, he will be given a reasonable opportunity of

being heard in the matter.

Meetings of the Board

Section 7
✓ The Board shall meet at such times and places and shall observe such rules of
procedure in regard to the transaction of business at its meetings as may be provided
by regulations made under Section 30 of the Act.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.3

✓ If for any reason, Chairman is unable to attend a meeting, any member chosen by
the members present from amongst themselves shall preside over the meeting.
✓ All questions which come up before any meeting shall be decided by majority vote of the
members present and the Chairman or the presiding member will have a second or
casting vote, in the event of equality of votes.

Member Not to Participate in Meetings in

Certain Cases
Section 7A
Any member-
✓ who is a director of a company, and
✓ who as such director has any indirect pecuniary interest in any matter coming up for
consideration at a meeting of the Board,
shall, as soon as possible after relevant circumstances have come to his knowledge, disclose
the nature of his interest at such meeting and such disclosure shall be recorded in the
proceedings of the Board, and the member shall not take any part in any deliberation or
decision of the Board with respect to that matter.

Vacancies etc. not to Invalidate Proceedings

Section 8
No act or proceeding of SEBI shall be invalid merely by reason of-
✓ Any vacancy in or any defect in constitution of SEBI
✓ Any defect in the appointment of a person acting as a member of SEBI
✓ Any irregularity in procedure of SEBI

Powers and Functions of SEBI

Section 11
It shall be the duty of the Board to protect the interest of investors in securities and to
promote the development of, and to regulate the securities market, by such measures as it
thinks fit.

Measures for Performance of Duties

a) regulating the business in stock exchanges and any other securities markets
b) registering and regulating the working of stock brokers, sub - brokers, share transfer
agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant
bankers, underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in any manner
ba) registering and regulating the working of the depositories, participants, custodians
of securities, foreign institutional investors, credit rating agencies and such other
intermediaries as the Board may, by notification, specify in this behalf.
c) registering and regulating the working of venture capital funds and collective
investment schemes, including mutual funds
d) promoting and regulating self-regulatory organizations
e) prohibiting fraudulent and unfair trade practices relating to securities markets
f) promoting investors' education and training of intermediaries' of securities markets
g) prohibiting insider trading in securities
h) regulating substantial acquisition of shares and take-over of companies

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.4

i) calling for information from, undertaking inspection, conducting inquiries and audits of
the stock exchanges, mutual funds, other persons associated with securities market,
intermediaries and self-regulatory organizations in the securities market
ia) calling for information and records from any person including any bank or any other
authority or board or corporation established or constituted by or under any Central or
State Act which, in the opinion of the Board, shall be relevant to any investigation or
inquiry by the Board in respect of any transaction in securities
ib) calling for information from, or furnishing information to, other authorities, whether
in India or outside India, having functions similar to those of the Board, in the matters
relating to the prevention or detection of violations in respect of securities laws, subject
to the provisions of other laws for the time being in force in this regard
Provided that the Board, for the purpose of furnishing any information to any authority
outside India, may enter into an arrangement or agreement or understanding with such
authority with the prior approval of the Central Government
j) performing such functions and exercising such powers under the provisions of the
Securities Contracts (Regulation) Act, 1956, as may be delegated to it by the Central
Government.
k) levying fees or other charges for carrying out the purposes of this section.
l) conducting research for the above purposes
la) calling from or furnishing to any such agencies, as may be specified by the Board,
such information as may be considered necessary by it for the efficient discharge of its
functions.
m) performing such other functions as may be prescribed.

Power of Inspection

Board may take measures to undertake inspection of any book, or register, or other
document or record of any listed public company or a public company which intends to get its
securities listed on any recognised stock exchange where the Board has reasonable grounds
to believe that such company has been indulging in insider trading or fraudulent and unfair
trade practices relating to securities market.

Same Powers of Civil Court

The Board shall have the same powers as are vested in a civil court under the Code of Civil
Procedure, 1908 while trying a suit, in respect of the following matters, namely:
✓ discovery and production of books of account and other documents
✓ summoning and enforcing the attendance of persons
✓ Examination on oath
✓ inspection of any books, registers and other documents of any persons
✓ inspection of any book, or register, or other document or record
✓ issuing commissions for the examination of witnesses or documents

Orders by Board in Case of Inquiry/Investigation

The Board may, by an order, for reasons to be recorded in writing, in the interests of investors
or securities market, take any of the following measures, either pending investigation or
inquiry or on completion of such investigation or inquiry, namely:-
(a) suspend the trading of any security in a recognised stock exchange
(b) restrain persons from accessing the securities market and prohibit any person
associated with securities market to buy, sell or deal in securities
(c) suspend any office-bearer of any stock exchange or self-regulatory organization from
CA. SHIVANGI AGRAWAL
SEBI ACT, 1992 13.5

holding such position

(d) impound and retain the proceeds or securities in respect of any transaction which is
under Investigation
(e) attach, after passing of an order on an application made for approval by the Judicial
Magistrate of the first class having jurisdiction, for a period not exceeding one month, one or
more bank account or accounts of any intermediary or any person associated with the
securities market in any manner involved in violation of any of the provisions of this Act, or
the rules or the regulations made there under.
(f) direct any intermediary or any person associated with the securities market in any manner
not to dispose of or alienate an asset forming part of any transaction which is under
investigation.

Amount To Be Credited To IEPF

The amount disgorged, pursuant to a direction issued, under the SEBI Act or the Securities
Contracts (Regulation) Act, 1956 or the Depositories Act, 1996, as the case may be shall be
credited to the Investor Protection and Education Fund (IPEF) established by the Board,
and such amount shall be utilised by the Board in accordance with the regulations made under
this Act.’’.

Regulation of Issue of Prospectus

Section 11A
SEBI has powers to take following measures:
✓ the matters relating to issue of capital, transfer of securities and other matters incidental
thereto and
✓ the manner in which such matters shall be disclosed by the companies
✓ prohibit any company from issuing prospectus, any offer document, or advertisement
soliciting money from the public for the issue of securities
✓ specify the conditions subject to which the prospectus, such offer document or
advertisement, if not prohibited, may be issued.
✓ may specify requirements for listing and transfer of securities and other matters.

Collective Investment Scheme

Section 11AA
Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or
subsection (2A) shall be a collective investment scheme.
.
Provided that any pooling of funds under any scheme or arrangement, which is not registered
with the Board or is not covered under sub-section (3), involving a corpus amount of one
hundred crore rupees or more shall be deemed to be a collective investment scheme.

Requisite Conditions [Section 11AA(2)]

Any scheme or arrangement made or offered by any person under which, -

✓ the contributions, or payments made by the investors, by whatever name called, are
pooled and utilized for the purposes of the scheme or arrangement
✓ the contributions or payments are made to such scheme or arrangement by the
investors with a view to receive profits, income, produce or property, whether movable
or immovable, from such scheme or arrangement

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.6

✓ the property, contribution or investment forming part of scheme or arrangement,

whether identifiable or not, is managed on behalf of the investors
✓ the investors do not have day-to-day control over the management and operation of the
scheme or arrangement

Any scheme or arrangement made or offered by any person satisfying the conditions as may
be specified in accordance with the regulations made under this Act.

Exceptions [Section 11AA(3)]

Any scheme or arrangement-

(i) made or offered by a co-operative society registered under the Co-operative
Societies Act, 1912 or a society being a society registered or deemed to be registered
under any law relating to co-operative societies for the time being in force in any
State
(ii) under which deposits are accepted by non-banking financial companies as defined in
clause (f) of section 45-I of the Reserve Bank of India Act, 1934
(iii) being a contract of insurance to which the Insurance Act, 1938 applies
(iv) providing for any Scheme, Pension Scheme or the Insurance Scheme framed under
the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(v) under which deposits are accepted under the Companies Act, 2013
(vi) under which deposits are accepted by a company declared as a Nidhi or a mutual
benefit society under the Companies Act, 2013
(vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of the
Chit Fund Act, 1982
(viii) under which contributions made are in the nature of subscription to a mutual fund
(ix) such other scheme or arrangement which the Central Government may, in
consultation with the Board, notify
shall not be a collective investment scheme.

Power to Issue Directions

Section 11B
SEBI may issue directions considering interests of investors issue directions to-
✓ Any person or class of persons referred in section 12
✓ Any person or class of persons associated with securities market
✓ Any company in respect of matters specified in section 11A

After making or causing to be made an enquiry, the Board has power to issue directions if it is
satisfied that it is necessary:
✓ in the interest of investors, or orderly development of securities market or
✓ to prevent the affairs of any intermediary or other persons referred to in Section 12
being conducted in a manner detrimental to interest of investors or securities market
or
✓ to secure the proper management of any such intermediary or persons.
The Board may by order for reasons to be recorded in writing levy penalty under sections 15A,
15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA, 15HB after holding an inquiry in the
prescribed manner.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.7

Investigation Section 11C

Grounds for Issue of an Order of Investigation

Where the Board has reasonable ground to believe that—

(a) the transactions in securities are being dealt with in a manner detrimental to the
investors or the securities market; or
(b) any intermediary or any person associated with the securities market has violated any of
the provisions of this Act or the rules or the regulations made or directions issued by the Board
there under.

It may, at any time by order in writing, direct any person specified in the order to
investigate the affairs of such intermediary or persons associated with the securities market
and to report thereon to the Board.

Documents to the Investigating Authority

It shall be the duty of-

✓ every manager, managing director, officer and other employee of the company and
✓ every intermediary referred to in section 12, or
✓ every person associated with the securities market to preserve, and
to produce to the Investigating Authority or any person authorised by it in this behalf, all the
books, registers, other documents and record of, or relating to, the company or, as the case
may be, of or relating to, the intermediary or such person, which are in their custody or
power.

Period of Custody

✓ The Investigating Authority may keep in its custody any books, registers, other
documents and record produced for six months and thereafter shall return the same
to any intermediary or any person associated with securities market by whom or on
whose behalf the books, registers, other documents and record are produced.
✓ The Investigating Authority may call for any book, register, other document and
record if they are needed again. If the person on whose behalf the books, registers,
other documents and record are produced requires certified copies of the books,
registers, other documents and record produced before the Investigating Authority, it
shall give certified copies of such books, registers, other documents and record to such
person or on whose behalf the books, registers, other documents and record were
produced.

Examination on Oath

Any person, directed to make an investigation, may examine on oath, any manager,
managing director, officer and other employee of any intermediary or any person associated
with securities market in any manner, in relation to the affairs of his business and may
administer an oath accordingly and for that purpose may require any of those persons to
appear before it personally.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.8

Penalty

If any person fails without reasonable cause or refuses—

a) to produce to the Investigating Authority or any person authorised by it in this behalf
any book, register, other document and record which is his duty to produce; or
b) to furnish any information which is his duty to furnish; or
c) to appear before the Investigating Authority personally or to answer any question
which is put to him by the Investigating Authority in pursuance of that sub-section; or
d) to sign the notes of any examination,

Search and Seizure

Where in the course of investigation, the Investigating Authority has reasonable ground to
believe that the books, registers, other documents and record of, or relating to, any
intermediary or any person associated with securities market in any manner, may be destroyed,
mutilated, altered, falsified or secreted, the Investigating Authority may make an application to
the Judicial Magistrate of the first class having jurisdiction for an order for the seizure of such
books, registers, other documents and record.

After considering the application and hearing the Investigating Authority, if necessary, the
Magistrate may, by order, authorise the Investigating Authority—
✓ to enter, with such assistance, as may be required, the place or places where such books,
registers, other documents and record are kept;
✓ to search that place or those places in the manner specified in the order; and
✓ to seize books, registers, other documents and record, it considers necessary for the
purposes of the investigation: Provided that the Magistrate shall not authorise seizure of
books, registers, other documents and record, of any listed public company or a public
company (not being the intermediaries specified under section 12) which intends to get
its securities listed on any recognised stock exchange unless such company indulges in
insider trading or market manipulation.

Quantum of Penalty

Person shall be punishable with-

✓ imprisonment for a term which may extend to one year, or
✓ with fine, which may extend to one crore rupees, or
✓ with both, and
✓ also with a further fine which may extend to five lakh rupees for every day after
the first during which the failure or refusal continues.

Cease and Desist Proceedings

Section 11D
✓ If the Board finds, after causing an inquiry to be made, that any person has violated,
or is likely to violate, any provisions of this Act, or any rules or regulations made there
under, it may pass an order requiring such person to cease and desist from
committing or causing such violation
✓ Provided that the Board shall not pass such order in respect of any listed public
company or a public company which intends to get its securities listed on any
recognised stock exchange unless the Board has reasonable grounds to believe that such
company has indulged in insider trading or market manipulation.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.9

Registration Certificate
Section 12
Who requires Certificate of Registration?

✓ Stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager, investment advi-
ser and such other intermediary who may be associated with securities market
✓ depository, participant, custodian of securities, foreign institutional investor, credit
rating agency or any other intermediary associated with the securities market
✓ venture capital funds or collective investment scheme including mutual funds

Application for Registration

Every application for registration shall be in such manner and on payment of such fees as
may be determined by regulations.

The Board may, by order, suspend or cancel a certificate of registration in such manner as may
be determined by regulations after giving opportunity of being heard.

Prohibition of Manipulative and Deceptive Devices, Insider

Trading and Substantial Acquisition of Securities
or Control
Section 12A
✓ No person shall directly or indirectly use or employ in connection with the issue,
purchase or sale of any securities listed or proposed to be listed on a recognized stock
exchange,
• any manipulative or deceptive device or
• contrivance in contravention of the provisions of this Act or the rules or the
regulations made there under
✓ employ any device, scheme or artifice to defraud in connection with issue or dealing in
securities which are listed or proposed to be listed on a recognised stock exchange.
✓ engage in any act, practice, course of business which operates or would operate as fraud
or deceit upon any person, in connection with the issue, dealing in securities which are
listed or proposed to be listed on a recognized stock exchange, in contravention of the
provisions of this Act or the rules or the regulations made there under
✓ engage in insider trading
✓ deal in securities while in possession of material or non public information or
communicate such material or non-public information to any other person, in a manner
which is in contravention of the provisions of this Act or the rules or the regulations
made there under.
✓ acquire control of any company or securities more than the percentage of equity
share capital of a company whose securities are listed or proposed to be listed on a
recognised stock exchange in contravention of the regulations made under this Act.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.10

Penalties

Section No. Particulars Penalty

Penalty for Failure to Furnish Information, Return Etc

15A If any person, who is required under this Act He shall be liable to a penalty
or any rules or regulations made there under ✓ which shall not be less
fails than one lakh rupees but
✓ to furnish any document, return or report ✓ which may extend to one
to the Board, fails to furnish the same lakh rupees for each day
✓ to file any return or furnish any during which such failure
information, books or other documents continues
within the time specified thereof in the ✓ subject to a maximum of
regulations, fails to file return or furnish one crore rupees
the same within the time specified
thereof in the regulations
✓ to maintain books of account or records,
fails to maintain the same
or files false or incorrect information

Penalty for Failure by Any Person to enter into Agreement with Clients

15B If any person, who is registered as an he shall be liable to a penalty

intermediary and is required under this Act or ✓ which shall not be less
any rules or regulations made there under to than one lakh rupees but
enter into an agreement with his client, fails to ✓ which may extend to one
enter into such agreement lakh rupees for each day
during which such failure
continues
✓ subject to a maximum of
one crore rupees.
Penalty for Failure to Redress Investors’ Grievances

15C If any listed company or any person who is such company or intermediary
registered as an intermediary, after having shall be liable to a penalty-
been called upon by the Board in writing ✓ which shall not be less than
including electronic communication, to one lakh rupees but
redress the grievances of investors, fails to ✓ which may extend to one
redress such grievances within the time lakh rupees for each day
specified by the Board during which such failure
continues
✓ subject to a maximum of
one crore rupees
Penalty for Certain Defaults in Case of Mutual Funds

15D If any person, who is required under this Act he shall be liable to a penalty-
or any rules or regulations made there under ✓ which shall not be less
to obtain a certificate of registration from the than one lakh rupees but
Board for sponsoring or carrying on any ✓ which may extend to one
collective investment scheme, including lakh rupees for each day
mutual funds, sponsors or carries on any during which such default/
CA. SHIVANGI AGRAWAL
SEBI ACT, 1992 13.11

collective investment scheme, including failure continues

mutual funds, without obtaining such ✓ subject to a maximum of
certificate of registration one crore rupees
If any person, who is registered with the
Board as a collective investment scheme,
including mutual funds, for sponsoring or
carrying on any investment scheme, fails to
comply with the terms and conditions of
certificate of registration
If any person, who is registered with the
Board as a collective investment scheme,
including mutual funds, fails to make an
application for listing of its schemes as
provided for in the regulations governing such
listing
registered as a collective investment scheme,
including mutual funds, fails to dispatch unit
certificates of any scheme in the manner
provided in the regulation governing such
dispatch
registered as a collective investment scheme,
including mutual funds, fails to refund the
application monies paid by the investors
within the period specified in the regulations
registered as a collective investment scheme,
including mutual funds, fails to invest money
collected by such collective investment
schemes in the manner or within the period
specified in the regulations

Penalty for Failure to Observe Rules and Regulations by an Asset

Management Company

15E Where Any Asset Management Company Of A such asset management

Mutual Fund Registered Under This Act, Fails company shall be liable to a
To Comply With Any Of The Regulations penalty
Providing For Restrictions On The Activities ✓ which shall not be less than
Of The Asset Management Companies 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
Penalty for Non Compliance with Regulations of AIF etc.

15EA Any person Min: 1 lakh

Fails to comply with regulations by SEBI in Max: 1 lakh for each day
respect of Alternate Investment Funds, subject to
Infrastructure Investment Trusts and Real Higher of
Estate Investment Trusts or fails to comply 1 crore/ 3 times of gain

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.12

with directions of SEBI

Penalty for Non Compliance with Regulations: Investment Advisor

15EB An investment advisor or research Analyst Min: 1 lakh

fails to comply with regulations made by SEBI Max: 1 lakh for each day of
or directions issued by SEBI failure subject to 1 Crore.

Penalty for Default in Case of Stock Brokers

15F Person registered as a stock broker fails to he shall be liable to a penalty

issue contract notes in the form and manner ✓ of more than 1 lakh but
specified by the stock exchange of which such ✓ which may extend to 5
broker is a member times contract note was
required to be issued.
✓ Max 1 crore
Person registered as a stock broker fails to he shall be liable to a penalty
deliver any security or fails to make payment of more than 1lakh but
of the amount due to the investor in the ✓ which may extend
manner within the period specified in the ✓ to one lakh rupees for each
regulations day during which he
sponsors or carries on any
such collective investment
scheme including mutual
funds
✓ subject to a maximum of
one crore rupees
Person registered as a stock broker charges an he shall be liable
amount of brokerage which is in excess of the ✓ for more than 1 lakh but
brokerage specified in the regulations ✓ which may extend to five
times the amount of
brokerage charged in
excess of the specified
brokerage,
✓ whichever is higher
Penalty for Insider Trading

Insider: Person connected with company who is reasonable expected to have price sensitive
information in respect of securities of a company.

Price Sensitive Information: Any information which relates directly or indirectly to a company
and which if published is likely to affect price of securities of company.
Eg: Periodical financial results, Intention to declare dividend, Issue of securities, Buy back,
Amalgamation, mergers, significant changes in policies etc.

15G If any insider who,— shall be liable to a penalty

(i) either on his own behalf or on behalf of which shall not be less than ten
any other person, deals in securities of a lakh rupees but which may
body corporate listed on any stock extend to twenty-five crore
exchange on the basis of any rupees or three times the
unpublished price-sensitive information amount of profits made out of

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.13

or insider trading, whichever is

(ii) communicates any unpublished price- higher
sensitive information to any person,
with or without his request for such
information except as required in the
ordinary course of business or under
any law or
(iii) counsels, or procures for any other
person to deal in any securities of any
body corporate on the basis of
unpublished price-sensitive information

Penalty for Non -Disclosure of Acquisition of Shares and Takeovers

15H If any person, who is required under this Act he shall be liable to a penalty
or any rules or regulations made thereunder, which shall not be less than ten
fails to,— lakh rupees but which may
(i) disclose the aggregate of his extend to twenty-five crore
shareholding in the body corporate rupees or three times the
before he acquires any shares of that amount of profits made out of
body corporate; or such failure, whichever is
(ii) make a public announcement to acquire higher
shares at a minimum price; or
(iii) make a public offer by sending letter of
offer to the shareholders of the
concerned company; or
(iv) make payment of consideration to the
shareholders who sold their shares
pursuant to letter of offer

Penalty for Fraudulent and Unfair Trade Practices

15HA If any person indulges in fraudulent and unfair he shall be liable to a penalty
trade practices relating to securities which shall not be less than five
lakh rupees but which may
extend to twenty-five crore
rupees or three times the
amount of profits made out of
such practices, whichever is
higher

Penalty for Alteration destruction of Records and failure to protect etc.

15HAA Any person who: Min: 1 lakh
knowingly Destroys, mutilates, conceals, Max: Higher of: 10 crores or 3
falsifies and information or record to obstruct times of profit
or influence investigation, inspection, inquiry
audit under the Act
Without authorization, access or tries to
access regulatory data in the database
Without authorization downloads or
reproduces regulatory data

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.14

Introduces virus and brings out trading halt

Disrupts functioning of system
Damages, deletes, alters or by any means
affect regulatory data
Providing assistance to anyone in any of the
above.

Penalty for Contravention where no Separate Penalty has been provided

15HB Whoever fails to comply with any provision of shall be liable to a penalty
this Act, the rules or the regulations made or which shall not be less than one
directions issued by the Board there under for lakh rupees but which may
which no separate penalty has been provided extend to one crore rupees

Illustration:
SEBI received complaints from some investors alleging that ABC Limited and some brokers are
indulging in price manipulation in the shares of ABC Limited. Explain the powers that can be
exercised by SEBI under the Securities and Exchange Board of India, 1992 in case the allegations
are found to be correct.

Price manipulation in the shares of ABC Ltd. can be considered as fraudulent and unfair trade
practice relating to securities market.
As per Section 15HA, if any person indulges in fraudulent and unfair trade practices relating to
securities, he shall be liable to a penalty of Rs. 25 crores or 3 times the amount of profits made
out of such practices, whichever is higher. In the given case, ABC Limited and the brokers who
indulged in price manipulation in the shares of ABC Limited are liable to penalty of Rs. 25 crores
or 3 times the amount of profits made out of such practices, whichever is higher.

Adjudication
Section 15I
Appointment of Adjudicating Officer

For the purpose of adjudging Penalties, the Board shall appoint any officer not below the
rank of a Division Chief to be an adjudicating officer for holding an inquiry in the prescribed
manner after giving any person concerned a reasonable opportunity of being heard for the
purpose of imposing any penalty.

Power of Officer

Adjudicating officer shall have power-

✓ to summon and enforce the attendance of any person acquainted with the facts and
circumstances of the case to give evidence or to produce any document
✓ which in the opinion of the adjudicating officer, may be useful for or relevant to the
subject-matter of the inquiry and
✓ if, on such inquiry, he is satisfied that the person has failed to comply with the
provisions of any of the sections specified,
✓ he may impose such penalty as he thinks fit in accordance with the provisions of any of
those sections.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.15

Order to Enhance Penalty

✓ The Board may call for and examine the record of any proceedings under this section
and if it considers that the order passed by the adjudicating officer is erroneous to
the extent it is not in the interests of the securities market, it may, after making or
causing to be made such inquiry as it deems necessary, pass an order enhancing the
quantum of penalty, if the circumstances of the case so justify
✓ Provided that no such order shall be passed unless the person concerned has been
given an opportunity of being heard in the matter
✓ Provided further that nothing contained in this sub-section shall be applicable after
an expiry of a period of three months from the date of the order passed by the
adjudicating officer or disposal of the appeal under section 15T, whichever is
earlier

Factors to be taken into Account by the

Adjudicating Officer
Section 15J
While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have
due regard to the following factors, namely :—
✓ the amount of disproportionate gain or unfair advantage, wherever quantifiable, made
as a result of the default
✓ the amount of loss caused to an investor or group of investors as a result of the
default
✓ the repetitive nature of the default.

Illustration:
An investor has complained to SEBI that he has not received the payment due to him from the
stock broker registered with Calcutta Stock Exchange Association Ltd. The complainant has
requested SEBI to take appropriate action against the stock broker. You are required to state
with reference to the provisions of Securities and Exchange Board of India Act, 1992 the answer
to the following:
(i) What action SEBI can take against the stock broker on the complaint as stated above?
(ii) What is the procedure to be adopted and what are the factors that will be taken into account
while taking such action?

A registered stock broker is liable to penalty under Section 15F in respect of certain defaults. If a
stock broker fails to make payment of the amount due to the investor in the manner and within
the period specified in the regulations, he shall be liable to a penalty of Rs. 1 lakh.

As per Section 151, SEBI shall appoint any of its officers (not below the rank of Division Chief) to
be an adjudicating officer for holding an enquiry in the prescribed manner. The adjudicating
officer shall give an opportunity of being heard before imposing any penalty.

As per Section 15J, while adjudging the quantum of penalty, the adjudicating officer shall have
due regard to the following factors:
✓ the amount of disproportionate gain or unfair advantage, wherever quantifiable, made
as a result of the default.
✓ the amount of loss caused to an investor or group of investors as a result of the default.
✓ the repetitive nature of the default.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.16

Establishment of Securities Appellate Tribunal

Section 15K
✓ The Central Government shall, by notification, establish a Tribunal to be known as the
Securities Appellate Tribunal to exercise the jurisdiction, powers and authority
conferred on it by or under this Act or any other law for the time being in force.
✓ The Central Government shall also specify in the notification referred to in sub-section
(1), the matters and places in relation to which the Securities Appellate Tribunal may
exercise jurisdiction.

Composition of Securities
Appellate Tribunal
Section 15L
✓ To be appointed
✓ By Notification Presiding Officer
✓ By Central Government

Jurisdiction may be exercised Judicial Members

✓ By benches
✓ Each bench shall include Technical
✓ Atleast 1 judicial Members
✓ & 1 technical member

Qualification for Appointment as Presiding Officer or Member of

Securities Appellate Tribunal
Section 15M
Qualifications of Presiding Officer

A person shall not be qualified for appointment as the Presiding Officer of the Securities
Appellate Tribunal unless he –

(a) is a sitting or retired Judge of the Supreme Court or a sitting or retired Chief Justice of a High
Court; or
(b) is a sitting or retired Judge of a High Court who has completed not less than seven years of
service as a Judge in a High Court.

Appointment of Presiding Officer

The Presiding Officer of the Securities Appellate Tribunal shall be appointed by the Central
Government in consultation with the Chief Justice of India or his nominee.

Qualification of Judicial Member

A person shall not be qualified for appointment as the Judicial Member of the Securities
Appellate Tribunal unless he is or has been a Judge of high court for 5 years

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.17

Qualifications of Technical Member

✓ is, or has been, a Secretary or an Additional Secretary in the Ministry or Department of

the Central Government or any equivalent post in the Central Government or a State
Government; or
✓ is a person of proven ability, integrity and standing having special knowledge and
professional experience, of not less than fifteen years, in financial sector including
securities market or pension funds or commodity derivatives or insurance.

Appointment of Judicial Member

Section 15MA
The Presiding Officer and Judicial Members of the Securities Appellate Tribunal shall be
appointed by the Central Government in consultation with the Chief Justice of India or his
nominee.

Appointment of Technical Member

Section 15MB
The Technical Members of the Securities Appellate Tribunal shall be appointed by the Central
Government on the recommendation of a Search-cum-Selection Committee consisting of the
following, namely:––
(a) Presiding Officer, Securities Appellate Tribunal—Chairperson
(b) Secretary, Department of Economic Affairs—Member
(c) Secretary, Department of Financial Services—Member and
(d) Secretary, Legislative Department or Secretary, Department of Legal Affairs— Member.

Other Points

✓ The Secretary, Department of Economic Affairs shall be the Convener of the Search-cum
Selection Committee.
✓ The Search-cum-Selection Committee shall determine its procedure for recommending
the names of persons to be appointed.

Appeal to the Securities Appellate Tribunal

Section 15T
(1) any person aggrieved,—
✓ by an order of the Board
✓ by an order made by an adjudicating officer under this Act; or
✓ by an order of the Insurance Regulatory and Development Authority or the Pension
Fund Regulatory and Development Authority,
may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the
matter.

Period of Appeal

✓ Every appeal shall be filed within a period of forty-five days from the date on
which a copy of the order made by the Board or the Adjudicating Officer or the
Insurance Regulatory and Development Authority or the Pension Fund Regulatory and
Development Authority, as the case may be, is received by him and it shall be in such
form and be accompanied by such fee as may be prescribed
CA. SHIVANGI AGRAWAL
SEBI ACT, 1992 13.18

✓ Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry
of the said period of forty-five days if it is satisfied that there was sufficient cause for not
filing it within that period.

Order by SAT

On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after
giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it
thinks fit, confirming, modifying or setting aside the order appealed against.

Sending of Copy of Order

The Securities Appellate Tribunal shall send a copy of every order made by it to the Board,
or the Insurance Regulatory and Development Authority or the Pension Fund Regulatory
and Development Authority, as the case may be the parties to the appeal and to the
concerned Adjudicating Officer.

Disposal of Appeal

The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt
with by it as expeditiously as possible and endeavor shall be made by it to dispose of
the appeal finally within six months from the date of receipt of the appeal.

Procedure and Powers of the

Securities Appellate Tribunal
Section 15Q
Guided By Principle of Natural Justice

The Securities Appellate Tribunal shall not be bound by the procedure laid down by the
Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural
justice and, subject to the other provisions of this Act, and of any rules, the Securities
Appellate Tribunal shall have powers to regulate their own procedure including the places
at which they shall have their sittings.

Powers of Civil Court

The Securities Appellate Tribunal shall have, for the purposes of discharging their functions
under this Act, the same powers as are vested in a civil court under the Code of Civil
Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters,
namely:-
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) reviewing its decisions;
(f) dismissing an application for default or deciding it ex parte;
(g) setting aside any order of dismissal of any application for default or any order passed by it
ex parte;
(h) any other matter which may be prescribed.

CA. SHIVANGI AGRAWAL

SEBI ACT, 1992 13.19

Other Points

✓ Every proceeding shall be a Judicial Proceeding within the meaning of IPC.

✓ Where Benches are constituted, the Presiding Officer of the Securities Appellate
Tribunal may, from time to time make provisions as to the distribution of the business of
the Securities Appellate Tribunal amongst the Benches and also provide for the matters
which may be dealt with, by each Bench.
✓ On the application of any of the parties and after notice to the parties, and after
hearing such of them as he may desire to be heard, or on his own motion without such
notice, the Presiding Officer of the Securities Appellate Tribunal may transfer any
case pending before one Bench, for disposal, to any other Bench.
✓ If a Bench of the Securities Appellate Tribunal consisting of two members differ in
opinion on any point, they shall state the point or points on which they differ, and
make a reference to the Presiding Officer of the Securities Appellate Tribunal who
shall either hear the point or points himself or refer the case for hearing only on such
point or points by one or more of the other members of the Securities Appellate
Tribunal and such point or points shall be decided according to the opinion of the
majority of the members of the Securities Appellate Tribunal who have heard the case,
including those who first heard it.

Appeal to Supreme Court

Section 15Z
✓ Any person aggrieved by any decision or order of the Securities Appellate
Tribunal may- file an appeal to the Supreme Court within sixty days from the date
of communication of the decision or order of the Securities Appellate Tribunal to him
on any question of law arising out of such order
✓ Provided that the Supreme Court may, if it is satisfied that the applicant was prevented
by sufficient cause from filing the appeal within the said period, allow it to be filed
within a further period not exceeding sixty days.

By virtue of the powers conferred under Section 29 & 30 of the Act, the SEBI is empowered to
make rules and regulations. In this context, the SEBI has framed rules under the Act and also
issued a number of regulations, guidance notes, circulars, notifications and clarifications etc.,
from time to time.
Eg.:
✓ SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
✓ SEBI (Prohibition of Insider Trading) Regulations, 2015
✓ SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2015
✓ Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)
(Second Amendment) Regulations, 2015
✓ The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Third Amendment) Regulations, 2015
✓ The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) (Fourth Amendment) Regulations, 2015
✓ The SEBI (Issue of Capital and Disclosure Requirements) (Sixth Amendment)
Regulations, 2015
✓ SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
✓ SEBI (Central Listing Authority) Regulations, 2003
✓ SEBI (Delisting of Securities) Guidelines, 2003
✓ SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme)
Guidelines, 1999
CA. SHIVANGI AGRAWAL
SEBI ACT, 1992 13.20

✓ SEBI (Issue of Sweat Equity) Regulations, 2002

✓ SEBI (Buy-Back of Securities) Regulations, 1998
✓ SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997
✓ SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Markets) Regulations, 2003
✓ SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Markets) Regulations, 1995
✓ SEBI (Mutual Funds) Regulations, 1996
✓ SEBI (Collective Investment Schemes) Regulations, 1999
✓ SEBI Guidelines for Foreign Institutional Investors
✓ SEBI (FIIs) Regulations, 1995
✓ SEBI (Venture Capital Funds) Regulations, 1996
✓ SEBI (Foreign Venture Capital Funds) Regulations
✓ SEBI (Depositories and Participants) Regulations, 1996
✓ SEBI (Custodian of Securities) Regulations, 1996
✓ SEBI (Credit Rating Agencies) Regulations, 1999
✓ SEBI (Merchant Bankers) Rules, 1992
✓ SEBI (Merchant Bankers) Regulations, 1992/SEBI (Registrars to an issue and Share
Transfer Agents)
✓ Rules, 1993
✓ SEBI (Registrars to an issue and Share Transfer Agents)Regulation, 1993
✓ SEBI (Underwriters) Rules, 1993
✓ SEBI (Underwriters) Regulations, 1993

CA. SHIVANGI AGRAWAL