Sebi weighs easier unified penalty rules for listed cos

Explores framework like the one for brokers that standardized and reduced fines

- Srushti Vaidya & Apoorva Ajith

The Securities and Exchange Board of India (Sebi) is examining whether the recently introduced common penalty framework for stock brokers can be extended to companies listed on stock exchanges, chairperson Tuhin Kanta Pandey said.

In October, the market regulator rationalized the process of levying penalties on stockbrokers, who often hold memberships across multiple exchanges and risk facing duplicate penalties for similar violations.

“We recently standardized the framework for penalties levied by stock exchanges on stock brokers. A major ease was to do away with the imposition of penalties by multiple exchanges for common violations. Now, penalties will be levied by a single exchange across exchanges. Extending this approach, we will now seek to establish a similar common framework for companies listed on multiple stock exchanges,” Pandey said at the Mint BFSI summit in Mumbai on Friday.

As part of the common penalty framework for stock brokers, Sebi also reduced penalty amounts and capped maximum penalties for certain violations. Sebi’s 10 October circular proposed using the term “financial disincentive” instead of “penalty” for procedural lapses or technical errors to avoid unnecessary reputational damage to brokers. “The term penalty is generally associated with stigma,” it noted.