The Securities and Appellate Tribunal (SAT) has imposed a fine of Rs.50,000 on National Stock Exchange (NSE) and asked it to return 90% excess fine it had charged from a broker. Due to the NSE ignoring directions issued by the tribunal and the Supreme Court (SC) in a matter where it had charged excess fines from a broker regarding the improper use of client funds. According to SAT, they had imposed the cost since the matter came to them thrice and went to the SC, and also, the broker was entitled to the cost of litigation which is assessed as Rs 50,000.

 

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The NSE had imposed a fine of Rs 10 lakh on Prrssar Commodities and also suspended the broker for 5 days after it conducted an inspection and found irregularities by the broker. The action was taken due to the broker placing client securities with the bank or financial institutions to raise funds, which were not used for respective client obligations or margins. However, the exchange by-laws under which the NSE had charged the penalty prescribe a maximum penalty of Rs 1 lakh, or 0.1% of the value of the misuse, whichever is higher. SAT found that if the penalty was calculated at the rate of 0.1% of the value, it would have come to Rs 54,300. In this case, the highest penalty could not have been more than Rs 1 lakh. The Supreme Court didn’t stay the proceedings against the broker but asked NSE to stick to the rule on the penalty.

According to the SAT, only a simple calculation was required to be given, and no justification was required. However, the NSE committee went overboard and misunderstood the directions of the SC and the Tribunal. Furthermore, SAT found that the NSE, while making the aforesaid observations found that the amount misused by the broker from client securities was ‘recouped’ and that no loss was caused to the investor or the client.

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