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

An investigation shows that an insider's trading on unpublished price sensitive information earned a profit of Rs 9 crore. The insider is held to have indulged in fraudulent and unfair trade practices. Under Section 15HA of the SEBI Act, 1992, what is the maximum penalty exposure?

The maximum penalty is Rs 27 crore. Section 15HA allows a penalty up to Rs 25 crore or three times the profit made, whichever is higher. Three times Rs 9 crore equals Rs 27 crore, which exceeds Rs 25 crore, so that becomes the upper limit.

  1. ARs 25 crore, as it is higher than three times profit
  2. BRs 27 crore, being three times the profit, as it is higher than Rs 25 croreCorrect
  3. CRs 9 crore, being the profit made
  4. DRs 5 lakh, being the minimum penalty

Explanation

Section 15HA provides a penalty of not less than Rs 5 lakh, extendable to Rs 25 crore or three times the profits, whichever is higher. Three times Rs 9 crore is Rs 27 crore, which exceeds Rs 25 crore, so the ceiling is Rs 27 crore. Choosing Rs 25 crore ignores the 'whichever is higher' test.

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