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CS Executive · Capital Market and Securities Laws · Securities Contracts (Regulation) Act, 1956

A clearing corporation, Sagar Clearing Ltd, failed to conduct its business with its members in accordance with SEBI rules, regulations and directions. Its illegal gains from the failure were Rs 10 crore. Under the Securities Contracts (Regulation) Act, 1956, what is the penalty position?

The penalty must be at least Rs 5 crore and may extend to Rs 25 crore or three times the gains, whichever is higher. Three times Rs 10 crore is Rs 30 crore, which is higher than Rs 25 crore, so the maximum is Rs 30 crore.

  1. APenalty of at least Rs 5 crore, extending to Rs 25 crore or Rs 30 crore, whichever is higher, so up to Rs 30 croreCorrect
  2. BPenalty of at least Rs 5 crore, extending to Rs 25 crore or Rs 10 crore, whichever is lower
  3. CPenalty fixed at Rs 10 crore, equal to the gains
  4. DPenalty of at least Rs 25 crore, extending to Rs 30 crore

Explanation

Section 23GA sets a minimum of Rs 5 crore and a maximum of Rs 25 crore or three times the gains, whichever is higher. Three times Rs 10 crore is Rs 30 crore, which exceeds Rs 25 crore, so the ceiling is Rs 30 crore. The 'lower' option misreads the rule.

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