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

An insider's trading in listed shares on unpublished price-sensitive information earns him a profit of Rs 9 crore. Under Section 15HA of the SEBI Act, if the practice is treated as a fraudulent and unfair trade practice, what is the maximum penalty he is liable to?

The maximum penalty is Rs 27 crore. Section 15HA permits a penalty up to Rs 25 crore or three times the profits, whichever is higher. Three times Rs 9 crore equals Rs 27 crore, which exceeds Rs 25 crore, so that higher figure is the ceiling.

  1. ARs 27 crore, being three times the profit, since it exceeds Rs 25 croreCorrect
  2. BRs 25 crore, because that is the fixed cap
  3. CRs 9 crore, equal to the profit made
  4. DRs 5 lakh, being the minimum amount

Explanation

Section 15HA allows a penalty not less than Rs 5 lakh but extending to Rs 25 crore or three times the profits, whichever is higher. Three times Rs 9 crore is Rs 27 crore, which is higher than Rs 25 crore. Choosing Rs 25 crore ignores the 'whichever is higher' wording.

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