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

A noticee argues before SEBI that since he made no profit from an alleged manipulative scheme, no penalty can be levied on him under Section 15HA of the SEBI Act, 1992. Which response is correct on the text of that section?

The argument fails. Section 15HA penalises any person who indulges in fraudulent and unfair trade practices, with a minimum of five lakh rupees. Profit is relevant only to one limb of the maximum, so absence of profit does not remove liability to penalty.

  1. ACorrect, because the penalty is linked only to profits made
  2. BCorrect, because the minimum penalty applies only where profit exists
  3. CIncorrect, because a penalty of at least five lakh rupees applies once the practices are indulged in, irrespective of profitCorrect
  4. DIncorrect, because the penalty must equal three times the loss caused to investors

Explanation

The section penalises any person who indulges in such practices, with a floor of five lakh rupees and a ceiling of the higher of Rs 25 crore or three times profits. Profit only affects one ceiling limb. Loss to investors is not the measure in the text.

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