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Brokers want time limit be imposed on Sebi to issue show-cause notices

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Synopsis

At present, the Securities and Exchange Board of India Act, 1992 does not prescribe any period of limitation for issuance of a show-cause notice (SCN) or for completion of the adjudication proceeding.

ETBFSI

Ahead of the Union Budget, stock brokers‘ association Anmi has urged the government to prescribe a time limit on Sebi for issuance of show-cause notices and cut down minimum fine on small investors to Rs 1 lakh from Rs 5 lakh at present for market violation rules. At present, the Securities and Exchange Board of India Act, 1992 does not prescribe any period of limitation for issuance of a show-cause notice (SCN) or for completion of the adjudication proceeding.

This results into several proceedings being initiated by the regulator several years after the alleged violation resulting into unnecessary hardship and grave prejudice to market participants and affects their ability to effectively respond to such notice, Anmi said in a statement on Monday.

In pre-budget proposals for Union Budget 2022-23, the Association of National Exchanges of Members of India (Anmi) on the behalf of its 900 stock brokers, said that time limitation should be imposed upon Sebi in terms of the outer limit for issuance of show-cause notice.

“Such time limitation being imposed would greatly improve the efficiency of the securities market regulator,” it added.

Also, the brokers’ association asked the government to bring down the minimum penalty of Rs 5 lakh to Rs 1 lakh for small investors.

“There is no discretion with the adjudicating officer to apply his mind or consider the gravity or the seriousness of the offence and small investors are suffering on account of minimum penalty of Rs 5 lakh levied even for petty offence,” it added.

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Under the rules, any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of Rs 25 crore or three times the amount of profits made out of such practices, whichever is higher subject to payment of minimum penalty of Rs 5 lakh.

In addition, stock brokers have sought industry status for Sebi-registered market intermediaries and rationalisation in the goods and services tax (GST) rates for the broking industry.

The industry status for market intermediaries will remove unwarranted restrictions and cost of funding and raising capital requirements for market intermediaries.

It has also requested the government to do away with the concept of speculative income and limit income classification arising out of capital market transactions to business income, long-term capital gain, and short-term capital gain.

Further, the association has urged government to provide tax exemption up to Rs 1 lakh in short term capital gain tax as well as provide tax exemption to senior citizens for dividend earned up to Rs 50,000.

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