Common penalty framework may be extended to listed firms: Sebi’s Pandey

MUMBAI: Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey said India’s market regulator is examining whether the recently introduced common penalty framework can be extended to listed companies as well. Mint BFSI conclave on Friday.

On October 10, Sebi rationalized the process of imposing penalties on stockbrokers, who often have memberships in more than one stock exchange and risk facing repeated penalties for similar violations. According to the revised framework, only the lead exchange will impose penalties for violations occurring between exchanges.

Pandey said Sebi is currently exploring whether a similar unified framework can be applied to listed companies listed on both the National Stock Exchange and BSE Ltd.

As part of the common penalty framework for stock brokers, Sebi has also reduced penalty amounts and capped maximum penalties for certain violations. In the first stage, 235 existing criminal articles were examined. The Sebi circular stated that while penalties for 40 violations were waived, 105 minor procedural errors were reclassified as “financial deterrents” and the number of actual violations came down to 90.

The October 10 circular also suggested the use of the term “financial deterrent” instead of “penalty” for procedural errors or technical errors to prevent unnecessary damage to brokers’ reputations. “The term punishment is often associated with stigma,” he said.

Pandey said that beyond the common framework for listed companies, Sebi is actively monitoring social media platforms for misleading content regarding the securities market.

“We have racked up more than lakh such cases in the last one and a half years. We will intensify our efforts to remove such content, especially considering that Sebi has been notified as the competent authority under the Information Technology Act,” Pandey said.

Pandey also said Sebi’s revamped surveillance architecture now produces predictive, rule-based alerts on manipulative trading patterns.