Sebi wants to review and rename ‘penalties' to avoid stigmatising brokers

Mint

07-07-2025

Kamlesh Varshney, whole-time member of the Securities and Exchange Board of India (Sebi) said on Monday that the regulator is looking to overhaul the penalties it imposes on market intermediaries. He suggested that many such actions are wrongly labelled as penalties unfairly stigmatising brokers, and that the regulator was close to completing the first phase of a penalty rationalisation framework.
'Some of the big initiatives that have been planned for future are, number one, rationalisation of penalties,' Varshney said. 'We had a meeting in February in Delhi with all the brokers, at which NSE was also present. There we outlined a few of our objectives. Number one was: how do we rationalise penalties, and can we have only one exchange designated for imposing them. [Another] important point was whether should we call it penalty.' He explained that in many cases, the sums were not actually penalties. "This creates unnecessary stigma on the broker,' he added.
Varshney also said that the Brokers' Industrial Standard Forum had worked on this problem in the past five months and had found a solution, adding 'the first phase of this rationalisation should happen very soon'.
Varshney said that apart from rationalising penalties, the regulator was also consulting market institutions on the possibility of having a common reporting portal. "Instead of brokers reporting their transactions at different exchanges, can we have a common portal? That work is also in progress,' he said.
Varshney was addressing an audience at the launch of the proxy advisory recommendations feature on the e-voting system in the investor app, a move designed to strengthen investor participation in corporate governance. The feature integrates research-backed recommendations from proxy advisory firms directly into the e-voting platform used by retail investors.
"By offering independent, research-based insights on shareholder resolutions, proxy advisory firms facilitate more informed decision-making—particularly for retail investors who may lack resources for in-depth analysis", Sebi chief Tuhin Kanta Pandey said while launching the feature.
On the sidelines of the event, Pandey answered queries about Sebi's recent action against American trading firm Jane Street. Asked if more firms were under the regulator's lens, he said, 'It is basically a surveillance issue and surveillance at a high level. We will continue and upgrade those surveillance measures. I don't think there are many other risks.'
On whether the case would prompt Sebi to review its optimisation of regulations, the Sebi chief reiterated that enforcement and surveillance, rather than more regulation, were the need of the hour. "Excess regulation does not mean excess surveillance. These are two different things,' he said.