FINANCE, ACCOUNTS AND AUDITCentral

Section 15EB of The Securities and Exchange Board of India Act, 1992

Where an investment adviser or a research analyst fails to comply with the regulations made by the Board or directions issued by the Board, such investment adviser or research analyst shall be liable to penalty which shall not be less than 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.]

Summary

This section applies exclusively to investment advisers and research analysts.
A penalty is charged if they fail to follow the regulations or directions set by the Board.
The minimum penalty for breaking these rules is one lakh rupees.
If they continue to break the rules, the penalty can increase by up to one lakh rupees for every day the default lasts.
The absolute maximum penalty an adviser or analyst can face under this section is one crore rupees, with no alternate calculation for profits made.

Practical examples

1Maya is a registered research analyst who publishes a stock report without including the mandatory risk disclosures required by the Board. The violation lasts for 10 days before she corrects it. She must pay a minimum of one lakh rupees, which could reach ten lakh rupees due to the daily penalty rate.

2David, an investment adviser, completely ignores a direct order from the Board to change his misleading website advertisement. He leaves it up for six months. Because the daily penalty of one lakh rupees quickly adds up, his total fine is eventually capped at the maximum limit of one crore rupees.

FAQ

1. Who specifically is penalized under this section?

Investment advisers and research analysts.

2. Does the penalty depend on how much profit the adviser made from breaking the rule?

No, unlike some other sections, this section strictly limits the penalty to one crore rupees and does not mention multiplying the profits.

3. What is the maximum daily penalty for a research analyst who ignores a direction?

The penalty can extend to one lakh rupees for each day the failure continues.

Test yourself

Q1.Under Section 15EB of The Securities and Exchange Board of India Act, 1992, what is the maximum possible penalty for a research analyst who ignores Board directions for several years?

Q2.Under Section 15EB of The Securities and Exchange Board of India Act, 1992, which professionals are subject to these specific penalties?

Q3.If an investment adviser fails to comply with a Board regulation, what is the minimum penalty under Section 15EB of The Securities and Exchange Board of India Act, 1992?

Q4.How does Section 15EB of The Securities and Exchange Board of India Act, 1992 differ from Section 15EA regarding maximum penalties?

15EAPreviousSection 15EA Penalty for default in case of alternative investment funds, infrastructure investment trusts and real estate investment trusts.15FNextSection 15F Penalty for default in case of stock brokers.

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