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

Under Section 12A(2) of the Securities Contracts (Regulation) Act, 1956, what must SEBI do before levying a penalty by order under the listed penalty sections?

SEBI must hold an inquiry in the prescribed manner and record its reasons in writing in the order. Section 12A(2) of the SCRA sets this requirement before penalty is levied, without needing parliamentary approval, a prior criminal conviction, or referral to the stock exchange.

  1. AObtain prior approval of Parliament for each order
  2. BHold an inquiry in the prescribed manner and record reasons in writingCorrect
  3. CWait for a criminal court to convict the person
  4. DRefer the matter to the concerned stock exchange for decision

Explanation

Section 12A(2) allows SEBI to levy penalty by an order, for reasons to be recorded in writing, after holding an inquiry in the prescribed manner. It requires neither parliamentary approval nor a criminal conviction, and the decision rests with SEBI rather than the exchange.

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