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      Question

      If any person, who is registered as a stock broker under

      this Act charges an amount of brokerage which is in excess of the brokerage specified in the regulations, he shall be liable to a penalty which shall
      A not be less than one lakh rupees but which may extend to ten times the amount of brokerage charged in excess of the specified brokerage, whichever is lower Correct Answer Incorrect Answer
      B be less than one lakh rupees but which may extend to five times the amount of brokerage charged in excess of the specified brokerage, whichever is higher Correct Answer Incorrect Answer
      C not be less than one lakh rupees but which may extend to five times the amount of total brokerage, whichever is higher Correct Answer Incorrect Answer
      D not be less than one lakh rupees but which may extend to five times the amount of brokerage charged in excess of the specified brokerage, whichever is higher Correct Answer Incorrect Answer
      E not be less than one lakh rupees but which may extend to ten times the amount of brokerage charged in excess of the specified brokerage, whichever is higher Correct Answer Incorrect Answer

      Solution

      Ā  Based on Section 15F(c) of the Securities and Exchange Board of India (SEBI) Act, 1992, the correct penalty is: Ā  not be less than one lakh rupees but which may extend to five times the amount of brokerage chargedĀ in excess of Ā the specified brokerage, whichever is higher Ā  Legal Breakdown (Section 15F) Ā  This section deals with "Penalty for default in case ofĀ  stock brokers ." specificallyĀ  regarding Ā the overcharging of brokerage fees. Ā 

      • Minimum Penalty: ā‚¹1 Lakh Ā 
      • Maximum Penalty: 5 times theĀ  excess Ā brokerage charged (not the total brokerage). Ā 
      • Condition: The penalty will be theĀ  higher Ā of the two amounts. Ā 
      Why this matters: This provision ensures that the penalty is proportionate to the violation. If the excess brokerage charged is small (e.g., ā‚¹5,000), the minimum penalty of ā‚¹1 Lakh acts as a deterrent. However, if the excess brokerage is massive (e.g., ā‚¹50 Lakhs), the penalty scales up to 5 times that amount (ā‚¹2.5 Crores), ensuring the offender does not profit from the violation. Ā 

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