Investment Advisers and Research Analysts to Face Huge Fine for Violation of SEBI Norms

New Delhi, February 2: Investment advisers and research analysts are set to attract huge penalties of up to Rs 1 crore for violation of Sebi norms, according to a proposal in the budget 2018-19. Failure to comply with regulations by individuals with respect to alternative investment funds (AIFs), infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) would also attract similar quantum of penalties.

The Finance Bill 2018 has proposed amendments to the Securities and Exchange Board of India Act, Securities Contracts (Regulation) Act and Depositories Act. As per changes proposed to the Sebi Act, an investment adviser or a research analyst fails to comply with relevant regulations, then they would be liable for fine of not less than Rs 1 lakh. The quantum can extend to Rs 1 lakh for each day during which such failure continues subject to a maximum of Rs 1 crore.

Similar provisions would be in place for violations by persons in respect of AIFs, InvITs and REITs. Besides, the government has proposed a fine ranging from 5 crores to Rs 25 crores for stock exchanges, clearing corporations and depositories that fail to carry out their business in accordance with regulations. The amount could also be "three times the amount of gains made out of such failure, whichever is higher".

In an amendment proposed to the Securities Contracts (Regulation) Act, "all settlement amounts, excluding the disgorgement amount and legal costs, realised under this Act shall be credited to the Consolidated Fund of India". Further, in case of any penalty payable under this Act, a legal representative would be liable to pay the same provided the fine was imposed before the death of the deceased person.