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

Under Section 12A of the Securities Contracts (Regulation) Act, 1956, SEBI finds that Kiran made a profit by dealing in contravention of the Act or its regulations. Which statement about SEBI's power is correct?

SEBI may direct Kiran to disgorge an amount equal to the wrongful gain made or loss averted. The Explanation to Section 12A includes this within SEBI's power to issue directions, so it covers both profit made and loss averted and does not require a court decree.

  1. AThe power covers directing Kiran to disgorge an amount equal to the wrongful gain made or loss avertedCorrect
  2. BSEBI can only levy a penalty and cannot direct any repayment of gains
  3. CSEBI can direct disgorgement only where a loss was caused, not where profit was made
  4. DSEBI can order disgorgement only through a civil court decree

Explanation

The Explanation to Section 12A states that the power to issue directions includes directing any person who made profit or averted loss through a contravening transaction to disgorge an amount equivalent to the wrongful gain or loss averted. Option B ignores this. Option C is wrong because profit made and loss averted are both covered.

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