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CS Executive · Capital Market and Securities Laws · Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market

A broker's client indulged in a fraudulent practice and the profit made was only Rs 1 lakh. A student argues that the penalty under Section 15HA can therefore be as low as Rs 3 lakh (three times the profit). Which statement is correct?

The student is wrong because Section 15HA sets a minimum penalty of five lakh rupees irrespective of the profit. The profit multiple only affects the maximum, which is twenty-five crore rupees or three times the profits, whichever is higher. So Rs 3 lakh is below the floor.

  1. AThe student is right, because the penalty is linked to profits made
  2. BThe student is wrong, because the penalty can never be below Rs 25 crore
  3. CThe student is wrong, because the penalty cannot be less than five lakh rupees regardless of the profitCorrect
  4. DThe student is right, because the penalty is limited to the amount of profit made

Explanation

Section 15HA fixes a floor of five lakh rupees. The three-times-profit figure only matters for the upper limit, and only when it exceeds Rs 25 crore. Rs 25 crore is a ceiling, not a minimum, so the second option is wrong too.

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