SEBI New Rules: The Securities and Exchange Board of India (SEBI) has made a major change for the stock market. SEBI has taken a step forward to ease compliance and as a major reform towards the market.
SEBI has finalized several major reforms for stock brokers and stock exchanges. SEBI has decided to rationalize and standardize the penalty framework applicable to stock brokers. Under the new rules, both the number and severity of penalties imposed on brokers will be reduced. SEBI has made this announcement to take a step forward towards Ease of Doing Business.
According to a report in Business Line, SEBI Chairman Tuhin Kant Pandey said that before formulating the new rules, the regulator held extensive discussions with stockbrokers. They were consulted, and the new rules were subsequently formulated. SEBI has decided that minor and minor mistakes by brokers will no longer be treated as a penalty. Instead, these will be termed as “Financial Discrepancy.” This means that minor mistakes will no longer result in heavy penalties.
Penalty will be imposed in only 90 cases instead of 235.
According to media reports, a total of 235 existing penalty items were reviewed under SEBI ‘s new system. Of these, 40 penalties were completely removed, while 105 minor procedural lapses and technical errors were classified as ‘Financial Disincentives’. After this, penalties will now be applicable only on 90 violations. SEBI has made changes in 36 penalties. In 7 cases, only a warning or advice will be given for the first offense. In 6 cases, the maximum penalty limit has been fixed. No change has been made in 29 cases. 12 new penalty provisions have been added.
Relief from technical glitches
Technical glitches in the market, such as order processing or system errors, often resulted in penalties for brokers. Under the new rules, penalties for such technical issues will be significantly reduced, thus reducing unnecessary pressure on brokers.
The word penalty will not be used everywhere
SEBI says that the word penalty is often associated with ‘stigma’ or ‘punishment’, which can affect the credibility of brokers. Therefore, in cases of technical or procedural mistakes, the word ‘penalty’ will now be replaced by the term ‘Financial Disincentive’. Along with this, SEBI has also made it clear that imposing penalties by different exchanges for the same mistake will be avoided. Now, as per SEBI’s system, only the lead exchange will take action in such cases, so that brokers do not receive punishment from multiple places for the same mistake.
