Typically, levies slapped by exchanges on traders even for fringe shortages keep on mounting with the quantity of and number of times there are shortages. Brokers set these fines following the directions of exchanges which in turn are controlled by capital markets' regulator, Securities and Exchange Board of India (SEBI). However, SEBI has gained notoriety for going soft on big offenders while being severe with smaller traders.
The latest case in point is the National Stock Exchange (NSE), which, despite being a repeat offender, has not only gotten off easy but also profited from the transgression. The NSE picked up stakes in six entities, including NSEIT Ltd., Market Simplified India Ltd. (MSIL), Power Exchange India Ltd., Receivables Exchange of India Ltd. (RXIL), NSDL E-Governance Infrastructure Ltd. (NSEIL) and the recently listed CAMS, sans the SEBI's sanction.
The SEBI order said that NSE had violated SECC norms and that the breach was serious in nature. It further said that NSE had been unsuccessful in remedying the situation and had not provided any material to show that it had applied for SEBI's post-facto approval with regards to the said investments.
However, when it came to punishing NSE for what amounted to flagrant disdain of the regulator, the SEBI let NSE off easy by imposing on the exchange a mere INR 1 CRORE fine when in reality, every instance of a breach on the NSE's part would have otherwise added up to a penalty of INR 6 CRORE.
Another reason why the INR 1 CRORE fine is a sham is that in 2013, NSE without the SEBI's permission bought 37.5 per cent stake in CAMS at less than INR 200 per share only to recently relieve its entire stake for more than INR 2100 CRORE at a price of INR 1,230 per share. The question therefore is will the SEBI or government authorities be as lenient with other entities as well?
Again, NSE is not the only biggie to have gotten off light. Only recently it was reported that the revenue department is probing a likely scam where a whopping INR 8,200 CRORE in capital gains tax has been evaded by several individuals and entities through reversal of options trade in illiquid stock options on the Bombay Stock Exchange (BSE).
Such fraudulent trades have been going on for many years now and the SEBI has been repeatedly catching the offenders. However, whatever good it does in catching the wrongdoers is wiped out by the meager punishments it doles out to them.
In the absence of harsh punishment, these offenders keep coming back with similar ways of converting black into white money. In light of the situation, it is felt that the least the regulator can do is slap a "Disgorgement of unlawful profit" order on such wrongdoers so that the monies they make illegally are taken away from them.