Introduction

On July 5th, 2019, the Finance Minister introduced the Finance Bill (No.2), 2019 (‘Finance Bill’) i.e. first budget of new term of the National Democratic Alliance (NDA). The bill apart from suggesting several structural reforms to the Indian economy, proposed to amend various provisions of the securities laws i.e. Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’).

1. Proposed Amendments to the Securities Contracts (Regulation) Act, 1956 (SCRA)
1. Clauses 145 under Part III of Finance Bill proposes to amend Section 23A (a) of SCRA. Section 23A, in its present form, provides for the penalty for failure to furnish information, document, books, returns or report, within the timelines specified under Listing Agreement or conditions or bye laws of the recognized stock exchanges, only to recognised stock exchange.
2. As per the amendment proposed, in addition to failure to furnishing of information to recognised stock exchange, addition to the term “Securities and Exchange Board of India (‘SEBI’ or the ‘Board’)” is proposed.
3. Thus now forth, any failure to furnish any information, document etc. as per the provisions of Listing Agreement or condition or bye laws of the recognized stock exchanges even to SEBI as well will attract penal provisions under SCRA.
2. Proposed Amendments to the Securities and Exchange Board of India Act, 1992
1. Transfer of Surplus Funds

   Clause 178 under Part IX of the finance bill, proposes to amend Section 14 of the SEBI Act so as to restrict the accumulation of huge surplus funds with SEBI and instead the surplus funds left, after incurring the prescribed expenses and transfer to the Reserve Fund, will be transferred to the Consolidated Fund of India.

2. Instructions by electronic means

   Under Clause 179, it is further proposed to amend Section 15C of the SEBI Act so as to include the words “including by any means of electronic communication”. The existing Section 15C provide that failure of any listed company or any person who is registered as an intermediary, to redress investors’ grievances after having been called upon by SEBI in writing. Vide proposed amendment, any communication through electronic means is also being covered within the preview of the Section. The said amendment is an attempt to keep up with the changing times and technological advancements.

3. Maximum penalty cap

   Under Clause 180, it is also proposed to amend Section 15F (a) of the SEBI Act. The current Section 15F (a) provided for a minimum monetary penalty for failure to issue contract notes in the form and in the manner specified by the stock exchange of which a registered stock broker is a member of INR One Lakh. However, the upper limit for the same was not provided for, therefore by virtue of this amendment, the upper cap of the penalty has been fixed at INR One Crores.

4. Penalty for destruction or alteration of electronic data in furtherance of obstruction of justice

   Lastly, under Clause 180, it is proposed to insert a new section 15HAA in the SEBI Act so as to provide monetary penalty for alteration, destruction, mutilation, concealment or falsification of information, record, document (including electronic records), relating to a contravention of the SEBI Act, so as to impede, obstruct, or influence the investigation, inquiry, audit, inspection or proper administration of any matter within the jurisdiction of the Board. The new Section 15HAAA will also protect electronic database(s) of the intermediaries regulated by SEBI under the SEBI Act.