Sebi revises penalty norms for stock brokers to remove ‘stigma’ – News Air Insight

The Securities and Exchange Board of India (Sebi) has introduced a uniform penalty structure across stock exchanges to be paid only once to one exchange for the same violation. It has also reduced the number of penalties on stock brokers from 235 to 90.

In the current penalty framework, penalties for similar observations may differ across exchanges, and in some cases, brokers having membership with multiple exchanges face multiple penalties for the same observation.

“The term penalty is generally associated with stigma. Using the term penalty for procedural lapses and technical errors creates unintended reputational risk for entities,” Sebi said on Friday.

The regulator has proposed the adoption of financial disincentives in place of penalties for procedural lapses.

The revised penalty framework is aimed at removing inconsistencies in the quantum of penalties across exchanges for the same type of observation.

It would avoid imposition of penalty by multiple exchanges by ensuring that penalties are levied by a lead exchange only for violations common across exchanges, Sebi said.The regulator said in certain cases it would replace a monetary penalty with just a warning for the first instance.Further, it would reduce the penalty amount and cap the maximum amount of penalty for certain violations.

Under the new framework, penalties have been removed on 40 violations, and 105 minor procedural lapses has been termed as financial disincentive, while retaining penalty only for 90 violations. “The revised penalty framework shall also be made applicable to ongoing enforcement proceedings, providing major relief to the stock broking community,” Sebi said.