SEBI Adjudication Process
The SEBI Adjudication Process is the quasi-judicial enforcement mechanism through which SEBI determines and levies monetary penalties for violations of the SEBI Act, securities laws, and regulations, conducted by a Adjudicating Officer (AO), with the option to appeal the AO's order to the Securities Appellate Tribunal (SAT).
SEBI's adjudication mechanism is the primary civil penalty tool in the Indian securities regulatory framework. It is governed by Chapter VIA of the SEBI Act, 1992 (Sections 15A to 15HB for specific penalty provisions and Sections 15-I to 15-J for procedural provisions) and by the Securities and Exchange Board of India (Procedure for Holding Enquiry and Imposing Penalties) Rules, 2003.
The process begins when SEBI's Enforcement Department, following an investigation or inspection, concludes that a violation has occurred and recommends adjudication. The Chairman of SEBI appoints an Adjudicating Officer (AO), typically a senior SEBI officer. The AO issues a show-cause notice to the noticee specifying the alleged violations, the provisions violated, and the penalty sought. The noticee has the opportunity to file a written reply and appear in person or through a representative for a personal hearing.
After considering the evidence, the written reply, and the hearing submissions, the AO passes a reasoned order. The order may impose a monetary penalty, issue a warning, or exonerate the noticee. Penalties under the SEBI Act range from Rs. 1 lakh to Rs. 25 crore or three times the profit made (whichever is higher) for most violations, with higher caps for specific offences. The AO must provide reasons for the quantum of penalty, taking into account the nature, gravity, and frequency of violations.
AO orders can be appealed before the Securities Appellate Tribunal (SAT) within 45 days of receipt. SAT is a statutory tribunal presided over by a retired Supreme Court or High Court judge, with appellate jurisdiction over SEBI orders including AO orders, Whole-Time Member (WTM) orders, and SEBI Board orders. SAT decisions can be further appealed to the Supreme Court on questions of law.
For serious violations — such as large-scale frauds, systematic market manipulation, or repeated violations — SEBI may refer cases to the AO for penalty and simultaneously or separately initiate criminal prosecution under Section 24 of the SEBI Act, which provides for imprisonment of up to ten years and/or fines. This dual-track enforcement (civil penalty and criminal prosecution) is deployed selectively in the most egregious cases.