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CS Executive · Capital Market and Securities Laws · Securities Market Intermediaries

SEBI suspects that a depository participant has diverted client securities involved in a transaction under investigation. Pending the investigation, SEBI wants to stop the participant from disposing of the asset. Which measure under Section 11(4) fits best?

SEBI can direct the participant not to dispose of or alienate the asset forming part of the transaction under investigation, under Section 11(4)(f). Suspending trading or removing office-bearers does not freeze the participant's assets, and penalties require an inquiry.

  1. ASuspend trading of the security on a recognised stock exchange
  2. BDirect the participant not to dispose of or alienate an asset forming part of the transaction under investigationCorrect
  3. CSuspend an office-bearer of a self-regulatory organisation
  4. DLevy a penalty without holding any inquiry

Explanation

Section 11(4)(f) lets SEBI direct any intermediary or person associated with the securities market not to dispose of or alienate an asset forming part of a transaction under investigation. Clause (a) concerns suspending trading of a security, not freezing a participant's assets. Penalty under 11(4A) requires an inquiry.

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