Appearing Before SEBI — Enforcement and Adjudication Guide for CS 2026

SEBI Enforcement Framework

SEBI exercises enforcement powers through: (a) Adjudication (Section 15-I): Adjudicating Officers (AOs) impose monetary penalties for violations of SEBI Act, SCR(A), and SEBI Regulations. (b) Regulatory Directions (Section 11/11B): SEBI can issue directions including: debarment from capital markets, disgorgement of profits, suspension/cancellation of registration, restraint from accessing securities market. (c) Consent/Settlement (Section 15JB): Parties can settle proceedings by paying a settlement amount — without admission of guilt. CS can represent parties in all these proceedings.

Adjudication Procedure

Step 1 — SCN: SEBI Adjudicating Officer issues a Show Cause Notice (SCN) citing the alleged violation, relevant regulation, and proposed penalty. Step 2 — Reply: The noticee files a detailed reply within the specified time (typically 21 days). Step 3 — Personal Hearing: The AO grants a personal hearing — the noticee (or representative) presents their case. Step 4 — Order: The AO passes a speaking order — either imposing penalty or dropping proceedings. Penalty amounts: Section 15A-15HB prescribe different penalty ranges for different violations (minimum Rs. 1 lakh to maximum Rs. 25 crore or 3 times the profits, whichever is higher — for serious violations). Step 5 — Appeal: Aggrieved party appeals to SAT within 45 days.

Common SEBI Violations Handled by CS

(a) LODR non-compliance: Late disclosures, delayed financial results, non-appointment of directors, corporate governance deficiencies. Penalty: Section 15A — up to Rs. 1 lakh per day of default. (b) Insider Trading: Dealing in securities while in possession of UPSI (Unpublished Price Sensitive Information). Penalty: Section 15G — Rs. 25 crore or 3 times profits. (c) Fraudulent Practices: Market manipulation, fraudulent/unfair trade practices. Penalty: Section 15HA — Rs. 25 crore or 3 times profits. (d) Takeover Code: Non-compliance with open offer requirements, failure to make disclosures under SEBI SAST Regulations. (e) Non-compliance by Intermediaries: Brokers, merchant bankers, portfolio managers violating SEBI regulations.

Consent Orders — Section 15JB

SEBI allows settlement of proceedings through CONSENT ORDERS: (a) the party applies for settlement BEFORE the AO's final order, (b) proposes a settlement amount (typically higher than the expected penalty — to incentivize SEBI to settle), (c) SEBI's High Powered Advisory Committee evaluates the proposal, (d) if accepted: the order records: "without admitting or denying the findings" — the party pays the settlement amount and proceedings are closed, (e) benefit for the party: no finding of violation on record, no debarment, faster resolution. CS can advise clients on whether to fight or settle — and negotiate the settlement amount.

CS Practice Before SEBI

CS can appear before SEBI as authorized representatives for: (a) listed companies (as Compliance Officer under SEBI LODR), (b) directors and KMPs of listed companies, (c) intermediaries (brokers, merchant bankers), (d) investors. Role: (a) drafting replies to SCNs, (b) presenting arguments at personal hearings, (c) negotiating consent/settlement, (d) filing appeals before SAT, (e) ensuring ongoing SEBI compliance to prevent future violations.

Key Factors for SEBI Penalty Determination

Section 15J: the AO considers: (a) amount of disproportionate GAIN or unfair advantage made, (b) amount of LOSS caused to investors or the market, (c) REPETITIVE nature of the violation, (d) whether the violation was DELIBERATE or inadvertent, (e) the person's FINANCIAL CAPACITY. Mitigating factors: first-time violation, prompt corrective action, no investor harm, cooperation with investigation, full disclosure. These factors should be highlighted in the reply to the SCN.