“Explore the comprehensive analysis of penalties under the Securities Contract (Regulation) Act, 1956, shedding light on various offenses, including contract violations, information disclosure, investor grievances, and more. Understand the repercussions, including imprisonment and fines extendable up to rupees 25 crores, imposed for non-compliance with the Act’s provisions. Stay informed to ensure transparency, investor protection, and the integrity of the securities market.”
Penalties prescribed by the Securities Contract (Regulation) Act, 1956, for non-compliance with its provisions. This comprehensive analysis explores various sections of Securities Contract (Regulation) Act, 1956, shedding light on the consequences of offenses related to contracts, information disclosure, investor grievances, segregation of securities, listing conditions, and more.
Chart of Penalties under Securities Contract Regulation Act, 1956
| Section | Offence | Penalty |
| 23(1)(a) | If a person fails to comply with any requisition made under sub-section (4) of section 6. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(b) | If a person enters into any contract in contravention of any of the provisions contained in section 13 or section 16. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(c) | If a person contravenes the provisions contained in section 17 or section 17A or section 19. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(d) | If a person enters into any contract in derivative in contravention of section 18A or the rules made under section 30. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(e) | If a person owns or keeps a place other than that of a recognised stock exchange which is used for the purpose of entering into or performing any contracts in contravention of any of the provisions of this Act and knowingly permits such place to be used for such purposes. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(f) | If a person manages, controls, or assists in keeping any place other than that of a recognised stock exchange which is used for the purpose of entering into or performing any contracts in contravention of any of the provisions of this Act or at which contracts are recorded or adjusted or rights or liabilities arising out of contracts are adjusted, regulated or enforced in any manner whatsoever. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(g) | If a person not being a member of a recognised stock exchange or his agent authorised as such under the rules or bye-laws of such stock exchange or not being a dealer in securities licensed under section 17 wilfully represents to or induces any person to believe that contracts can be entered into or performed under this Act through him. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(h) | If a person not being a member of a recognised stock exchange or his agent authorised as such under the rules or bye-laws of such stock exchange or not being a dealer in securities licensed under section 17, canvasses, advertises or touts in any manner either for himself or on behalf of any other persons for any business connected with contracts in contravention of any of the provisions of this Act. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(1)(i) | If a person joins, gathers or assists in gathering at any place other than the place of business specified in the bye-laws of a recognised stock exchange any person or persons for making bids or offers or for entering into or performing any contracts in contravention of any of the provisions of this Act. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23(2) | If any person enters into any contract in contravention of the provisions contained in section 15, section 21, section 21A or section 22. | Punished with imprisonment for a term extendable up to 10 years or fine extendable up to rupees 25 crores or both. |
| 23A | If any person is required to furnish any information, document, books, returns or report to the recognised stock exchange or the Board, fails to furnish it within the specified time or furnishes false, incorrect or incomplete information. | Not less than 1 lakh rupees but extendable up to 1 lakh rupees each day of offence subject to a maximum of 1 crore rupees. |
| 23B | If any person who is required to enter into an agreement with his client, fails to enter into such an agreement. | Not less than 1 lakh rupees but extendable up to 1 lakh rupees each day of offence subject to a maximum of 1 crore rupees. |
| 23C | If any stock broker or sub- broker or a company whose securities are listed or proposed to be listed in a recognised stock exchange, after having been called upon by the Securities and Exchange Board of India or a recognised stock exchange in writing, to redress the grievances of the investors, fails to redress such grievances within the time stipulated by the Securities and Exchange Board of India or a recognised stock exchange. | Not less than 1 lakh rupees but extendable up to 1 lakh rupees each day of offence subject to a maximum of 1 crore rupees. |
| 23D | If any person, who is registered under section 12 of the Securities and Exchange Board of India Act, 1992 as a stock broker or sub-broker, fails to segregate securities or moneys of the client or clients or uses the securities or moneys of a client or clients for self or for any other client. | Not less than 1 lakh rupees which may extend up to 1 crore rupees. |
| 23E | If a company or any person managing collective investment scheme or mutual fund or real estate investment trust or infrastructure investment trust or alternative investment fund fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof. | Not less than 5 lakh rupees which may extend up to 25 crore rupees. |
| 23F | If any issuer dematerialises securities more than the issued securities of a company or delivers in the stock exchanges the securities which are not listed in the recognised stock exchange or delivers securities where no trading permission has been given by the recognised stock exchange. | Not less than 5 lakh rupees which may extend up to 25 crore rupees. |
| 23G | If a recognised stock exchange fails or neglects to furnish periodical returns or furnishes false, incorrect or incomplete periodical returns to the Securities and Exchange Board of India or fails or neglects to make or amend its rules or bye-laws as directed by the Securities and Exchange Board of India or fails to comply with directions issued by the Securities and Exchange Board of India. | Not less than 5 lakh rupees which may extend up to 25 crore rupees. |
| 23GA | Where a stock exchange or a clearing corporation fails to conduct its business with its members or any issuer or its agent or any person associated with the securities markets in accordance with the rules or regulations made by the Securities and Exchange Board of India and the directions issued by it under this Act, the stock exchange or the clearing corporations, as the case maybe. | Not less than 5 crore rupees which may extend up to 25 crore rupees or three times the amount of gains made out of such failure, whichever is higher. |
| 23H | Whoever fails to comply with any provision of this Act, the rules or articles or bye- laws or the regulations of the recognised stock exchange or directions issued by the Securities and Exchange Board of India for which no separate penalty has been provided. | Not less than 1 lakh rupees which may extend up to 1 crore rupees. |
23M. – Offence
(1) Without prejudice to any award of penalty by the adjudicating officer [or the Securities and Exchange Board of India] under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations or bye-laws made thereunder, for which no punishment is provided elsewhere in this Act, he shall be punishable with imprisonment for a term which may extend to ten years, or with fine, which may extend to twenty-five crore rupees or with both.
(2) If any person fails to pay the penalty imposed by the adjudicating officer [or the Securities and Exchange Board of India] or fails to comply with [the direction or order], he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years, or with fine, which may extend to twenty-five crore rupees, or with both.
Conclusion: The Securities Contract (Regulation) Act, 1956, imposes significant penalties to uphold the integrity of the securities market. Participants must be aware of the potential consequences of non-compliance with the Act’s provisions, ranging from fines to imprisonment. By understanding and adhering to these penalties, market participants can ensure transparency, investor protection, and the overall stability of the securities market.
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