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Section 11B is not punitive in nature

Section 11B is not punitive in nature


A recent decision of the Securities Appellate Tribunal (SAT) has once again underlined the prin-ciple that the power of the Securities and Exchange Board of India (SEBI) to issue directions under Section 11B of the Securities and Exchange Board of India Act, 1992 (SEBI Act) cannot be used to impose penalties. If there were one really long-standing controversy around securities law since the inception of the provision in 1995, it is about the scope of usage of the power. Essentially, Section 11B of the SEBI Act empowers SEBI to issue directions in the interests of investors, for the orderly development of the securities market, to prevent the affairs of any market intermediary from being conducted in a manner detrimental to the securities market, or to secure the proper management of the affairs of any market intermediary. SEBI has interpreted this power in a very wide manner – ranging from putting an intermediary out of business for specified periods of time (or even indefinitely, pending investigation) to asking persons who are not even intermediaries with SEBI to refrain from doing a range of actions that SEBI could argue would impact the securities market.

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