**Executive Summary**
This document is a press release (PR No.66/2025) from the Securities and Exchange Board of India (SEBI) regarding the rationalisation and standardisation of penalties levied on stock brokers by stock exchanges. SEBI, in consultation with stock exchanges, has issued a revised penalty framework based on recommendations from a Working Group. Key deadlines include the implementation of common reporting (Samuhik Prativedan Manch) by August 01, 2025, and an additional phase by October 15, 2025.
**Key Points / Main Content**
* **Revised Penalty Framework:**
* Aims to remove inconsistencies in the nature and quantum of penalties across exchanges.
* Aims to avoid penalties by multiple exchanges for common violations by designating a lead exchange.
* Replaces the term "penalty" with "financial disincentive" for procedural lapses/technical errors.
* Rationalises penalties by replacing monetary penalties with advisories/warnings for first-time instances.
* Reduces the amount of penalty and caps the maximum amount of penalty.
* 235 existing penalty items were reviewed, resulting in:
* Removal of penalties on 40 violations.
* Classification of 105 minor procedural lapses as 'financial disincentive'.
* Rationalization of penalties for 36 violations.
* Advisory/warning in place of penalty for first instance for 7 violations.
* Introduction of capping for 6 violations.
* No change for 29 violations.
* Introduction of 12 new penalties.
* 90 penalties now remaining.
* **Samuhik Prativedan Manch (SPM):**
* A technology-based common reporting mechanism enabling filing of a common report at one stock exchange instead of multiple.
* Implemented from August 01, 2025, with 40 compliance reports operationalised.
* A second phase is to be implemented from October 15, 2025, with 30 additional compliance reports.
**Impact Analysis**
**Stock Brokers**
* **Impact:** Stock brokers will benefit from a more consistent, standardized, and less stigmatizing penalty framework, easing the cost of compliance.
* **Action Required:** Stock brokers need to familiarise themselves with the revised penalty framework and SPM reporting requirements.
**Stock Exchanges**
* **Impact:** Stock exchanges must implement the revised penalty framework and SPM reporting mechanism.
* **Action Required:** Stock exchanges need to update their internal processes and systems to align with the revised guidelines.
Key Entities Referenced
Securities and Exchange Board of India: The regulator that constituted a Working Group and was consulted on the revised penalty framework.
Stock Exchanges: Entities that levy penalties on stock brokers and are issuing the revised penalty framework.
Revised Penalty Framework: Aims to rationalize and standardize penalties levied on stock brokers by stock exchanges.
Working Group (WG): Comprising representatives from exchanges and broker associations, it was formed by SEBI to review the existing penalty framework.
Samuhik Prativedan Manch (SPM): A technology based common reporting mechanism which enables filing of common report at one stock exchange instead of at multiple exchanges.
PR No.66/2025
Ease of doing business – Rationalisation and standardisation of penalties
levied on stock brokers by stock exchanges
In a significant step towards enhancing ease of doing business for stock brokers, it
has been decided to rationalize and standardise the penalty framework for levying
penalties on stock brokers by stock exchanges.
In the current penalty framework, penalties for similar observations may differ across
exchanges, and in some cases, brokers having membership with multiple exchanges
may face multiple penalties for the same observation. The term ‘penalty’ is generally
associated with stigma. Using the term ‘penalty’ for procedural lapses/technical errors
creates unintended perception/reputational risk for entities.
To address these issues through a consultative approach, SEBI constituted a Working
Group (WG) comprising representatives from exchanges and broker associations to
review the existing penalty framework. As per recommendations of the WG and
subsequent deliberations, the revised penalty framework has been issued by the stock
exchanges in consultation with SEBI on October 10, 2025.
The revised penalty framework aims to:
remove inconsistencies in the nature and quantum of penalties across
exchanges for the same type of observation;
avoid imposition of penalty by multiple exchanges by ensuring that penalties
will be levied by a lead exchange only for violations common across exchanges;
adopt the terminology ‘financial disincentive’ in place of ‘penalty’ for procedural
lapses/technical errors to avoid unnecessary reputational impact on stock
brokers;
Page 1 of 2 rationalise certain penalties (which are actually in the nature of penalty) by way
of replacing the monetary penalty with advisory/warning for first instance;
reduce the amount of penalty and cap the maximum amount of penalty for
certain violations.
In the first phase, total 235 existing penalty items have been reviewed, details of which
are as follows:
a) Penalties have been removed on 40 violations.
b) Penalty for 105 minor procedural lapses has been termed as ‘financial
disincentive’. Accordingly, penalties remain only for 90 violations, which have
been rationalized as follows:
Penalty rationalized 36
Advisory/warning in place of penalty for first 7
Introduction of capping 6
instance
No change 29
New penalties Introduced 12
Total 90
The revised penalty framework shall also be made applicable to ongoing enforcement
proceedings providing major relief to stock broking community. The rationalised
penalty framework shall facilitate ease of doing business and ease of compliance for
stock brokers.
Samuhik Prativedan Manch (SPM)
Samuhik Prativedan Manch is a technology based common reporting mechanism
which enables filing of common report at one stock exchange instead of at multiple
exchanges. This common reporting across stock exchanges has been implemented
with effect from August 01, 2025 in order to reduce the compliance cost for stock
brokers. In the first phase, submission of 40 compliance reports was operationalised.
As an additional measure of ease of doing business, the second phase would be
implemented from October 15, 2025 with operationalisation of 30 additional
compliance reports.
Mumbai
October 10, 2025
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