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CS Executive · Capital Market and Securities Laws · Collective Investment Schemes

Mr. Iyer sponsors a collective investment scheme without obtaining the required SEBI certificate of registration and continues for several months. Under Section 15D of the SEBI Act, what penalty applies?

Under Section 15D(a), the penalty is not less than one lakh rupees, extending to one lakh rupees for each day the unregistered scheme is sponsored or carried on, subject to a maximum of one crore rupees. Older formulas and the Section 15EA gains-based formula do not apply.

  1. AA penalty not exceeding ten thousand rupees per day or ten lakh rupees, whichever is higher
  2. BA penalty of not less than one lakh rupees, extending to one lakh rupees per day, subject to a maximum of one crore rupeesCorrect
  3. CA penalty of five thousand rupees per day with no maximum
  4. DA penalty of three times the gains made, with no upper limit

Explanation

Section 15D(a) provides a penalty of not less than one lakh rupees but which may extend to one lakh rupees for each day the person sponsors or carries on the scheme, subject to a maximum of one crore rupees. Option A is the old pre-2002 wording that has been substituted, and the three-times-gains formula belongs to Section 15EA.

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