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CS Executive · Capital Market and Securities Laws · Secondary Market in India

Mehta Securities Ltd., a stock broker, has completed a SEBI inquiry which found that its affairs were being run in a way harmful to investors. Under the SEBI Act, 1992, which step is SEBI empowered to take under Section 11B after making the inquiry?

SEBI may issue appropriate directions to the broker. Under Section 11B of the SEBI Act, once an inquiry satisfies SEBI that it is necessary in the interest of investors or orderly market development, it can direct the intermediary or persons associated with the securities market.

  1. AIssue appropriate directions to the broker in the interest of investors and the securities marketCorrect
  2. BTransfer the inquiry to the Consolidated Fund of India for decision
  3. CDirect the Central Government to pay compensation to investors
  4. DAmend the Securities Contracts (Regulation) Act, 1956 for the broker

Explanation

Section 11B allows SEBI, after an inquiry, to issue directions when necessary in the interest of investors or orderly development of the market, or to prevent an intermediary's affairs being conducted detrimentally. The other options are not powers conferred by the section.

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