To address these disparities, the regulator had formed a working group comprising representatives from stock exchanges and broker associations
| Photo Credit:
ABEER KHAN
The Securities and Exchange Board of India (SEBI) has rationalised and standardised the penalty framework followed by stock exchanges for brokers to bring consistency in how penalties are imposed and reduce instances of multiple exchanges levying fines for the same violation.
Earlier, penalties for similar observations often differed across exchanges, and in some cases, brokers having membership with multiple exchanges may face multiple penalties for the same observation.
To address these disparities, the regulator had formed a working group comprising representatives from stock exchanges and broker associations. The new framework, issued on Friday, reduces the number of penalties levied on stock brokers by exchanges to 90 from 235.
In the first phase, a total of 235 existing penalty items have been reviewed. Of these, 40 penalties have been removed and 105 minor procedural lapses have been termed as ‘financial disincentive’. So only 90 penalties remain, of which, 36 have been rationalised, seven replaced with advisories for first-time offences, six capped and 12 new penalties introduced.
SEBI has sought to reduce the reputational stigma associated with penalties for procedural lapses. “The term ‘penalty’ is generally associated with stigma. Using the term ‘penalty’ for procedural lapses/technical errors creates unintended perception/reputational risk for entities,” the regulator said.
The revised framework aims to “remove inconsistencies in the nature and quantum of penalties across exchanges” and “avoid imposition of penalty by multiple exchanges by ensuring that penalties will be levied by a lead exchange only for violations common across exchanges.”
The regulator added that certain penalties will be rationalised by replacing monetary fines with advisory or warning notes for first-time violations. The revised penalty framework will also be made applicable to ongoing enforcement proceedings providing major relief to the stock broking community.
SEBI also announced the second phase of its Samuhik Prativedan Manch — a common reporting mechanism that allows brokers to file a single report with one exchange instead of multiple submissions. The second phase, operational from October 15, will include 30 additional compliance reports.
Published on October 10, 2025
