What stock brokers want from SEBI, finance minister Sitharaman ahead of budget


by 5paisa Research Team Last Updated: Dec 20, 2021, 05:32 PM IST

As finance minister Nirmala Sitharaman gets busy with preparing for the upcoming union budget, representations and demands from all quarters are pouring in. 

The latest interest group that has added their demands to the litany are stockbrokers, who, among other things, are asking the government to prescribe a time limit for the capital markets regulator to issue show cause notices. 

What are the brokers demanding?

The stockbrokers want the government to prescribe a time limit within which the Securities and Exchange Board of India (SEBI) can issue show-cause notices for market violations. 

At present, the SEBI Act, 1992 does not prescribe any period of limitation for issuance of a show-cause notice (SCN) or for completion of the adjudication proceeding, a report in the Business Standard newspaper says. 

This, brokers say, results into several proceedings being initiated by the regulator several years after the alleged violation resulting into unnecessary hardship and grave prejudice to market participants and affects their ability to effectively respond to such notice. 

Which lobby group has made this demand from the government?

This demand has been put forth by the Association of National Exchanges of Members of India (ANMI) on the behalf of its 900 members. 

The association has said that a time limit should be imposed upon SEBI for issuance of show-cause notices. “Such time limitation being imposed would greatly improve the efficiency of the securities market regulator,” it added.

What else do the brokers want?

The brokers also want the government to bring down the minimum penalty of Rs 5 lakh to Rs 1 lakh for small investors.

“There is no discretion with the adjudicating officer to apply his mind or consider the gravity or the seriousness of the offence and small investors are suffering on account of minimum penalty of Rs 5 lakh levied even for petty offence," the lobby goup has said in its representation to the government. 

What do the present rules stipulate?

Under the rules, any person who indulges in fraudulent and unfair trade practices relating to securities shall be liable to a penalty of Rs 25 crore or three times the amount of profit made out of such practices, whichever is higher subject to payment of minimum penalty of Rs 5 lakh.

Are there any more long-term demands?

Yes, stock brokers have sought industry status for SEBI-registered market intermediaries and rationalisation in the goods and services tax (GST) rates for the broking industry.

The industry status for market intermediaries will remove unwarranted restrictions and cost of funding and raising capital requirements for market intermediaries.

It has also requested the government to do away with the concept of speculative income and limit income classification arising out of capital market transactions to business income, long-term capital gain, and short-term capital gain.

Further, the association has urged government to provide tax exemption up to Rs 1 lakh in short-term capital gain as well as provide tax exemption to senior citizens for dividend earned up to Rs 50,000.

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