SEBI plans new penalty system to ease burden on brokerage firms: Report

Mumbai: The Securities and Exchange Board of India (SEBI) is working on a new penalty system that would prevent brokerage firms from being fined multiple times for the same violation.

The proposal, which has been under discussion for the past year, aims to stop different stock exchanges from imposing separate penalties for a single default.

The SEBI is in talks with stock exchanges to implement this rule, which would help reduce the financial burden on brokers, NDTV Profit reported.

Currently, brokerage firms can face penalties from multiple exchanges for the same regulatory violation.

For example, if a broker fails to report a technical glitch on time, does not settle client funds, or fails to resolve investor complaints, all stock exchanges can impose fines separately.

This leads to a heavy penalty burden on brokers, the report said.

The SEBI is now working on a framework to streamline penalties and improve the ease of doing business for brokers.

However, there is no fixed timeline yet for when this new system will be implemented, as per the NDTV Profit.

Meanwhile, the market regulator approved an increase in the disclosure threshold for foreign portfolio investors (FPIs) from Rs 25,000 crore to Rs 50,000 crore. The decision was announced following the SEBI board meeting held in Mumbai earlier this week.

The regulator stated that the revision was necessary due to the sharp rise in trading volumes in the cash equity market. Since the previous threshold was set in FY 2022-23, market trading volumes had more than doubled.

“Cash equity market trading volumes have more than doubled between FY 2022-23 (when the limits were set) and the current FY 2024-25. In light of this, the Board approved a proposal to increase the applicable threshold from the present Rs 25,000 crore to Rs 50,000 crore,” the SEBI stated.

As per the SEBI’s circular issued on August 24, 2023, only FPIs holding over Rs 50,000 crore in Indian equities would now be required to make additional disclosures.

These disclosures aimed to ensure compliance with the Prevention of Money Laundering Act (PMLA) and related regulations.

The primary objective was to prevent the potential misuse of investments and maintain transparency in the financial system.

–IANS