Synopsis
SEBI is crafting a penalty framework to stop multiple fines on brokerage firms for a single infraction. In related news, the disclosure threshold for foreign portfolio investors has been raised to Rs 50,000 crore amid rising market trading volumes.Key Takeaways
- SEBI is implementing a new penalty system.
- Aims to prevent multiple fines for the same violation.
- In discussions with stock exchanges for implementation.
- Financial burden on brokers is a key concern.
- Disclosure threshold for FPIs increased to Rs 50,000 crore.
Mumbai, March 27 (NationPress) The Securities and Exchange Board of India (SEBI) is developing a new penalty framework aimed at preventing brokerage firms from facing multiple fines for the same regulatory infraction. This initiative, which has been under consideration for the last year, seeks to eliminate the practice of different stock exchanges imposing individual penalties for a single violation.
The SEBI is currently engaged in discussions with stock exchanges to implement this regulation, which is expected to alleviate the financial strain on brokers, as reported by NDTV Profit.
At present, brokerage firms can incur penalties from multiple exchanges for the same regulatory breach. For instance, if a broker neglects to report a technical issue promptly, fails to settle client funds, or does not address investor complaints, all stock exchanges have the authority to impose separate fines.
This scenario results in a substantial penalty burden on brokers, according to the report.
The SEBI is in the process of creating a system to streamline penalties and enhance the ease of conducting business for brokers.
However, there is currently no definitive timeline for the implementation of this new framework, as per NDTV Profit.
In other developments, the market regulator has sanctioned an increase in the disclosure threshold for foreign portfolio investors (FPIs) from Rs 25,000 crore to Rs 50,000 crore. This decision was made public following a SEBI board meeting conducted in Mumbai earlier this week.
The regulator indicated that the adjustment was essential due to a significant increase in trading volumes within the cash equity market. Since the prior threshold was established in FY 2022-23, market trading volumes have more than doubled.
According to the SEBI, "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 former Rs 25,000 crore to Rs 50,000 crore."
Per SEBI’s circular issued on August 24, 2023, only FPIs holding over Rs 50,000 crore in Indian equities will now be mandated to provide additional disclosures.
These disclosures are intended to ensure compliance with the Prevention of Money Laundering Act (PMLA) and associated regulations.
The primary aim is to avert potential misuse of investments and uphold transparency within the financial system.
