Enforcement of Securities Laws in India : An Empirical Overview

The Securities and Exchange of Board of India (SEBI) is one of the most powerful regulators in India. As the regulator of one of the world's largest capital markets, it has a range of enforcement tools at its disposal, such as the imposition of monetary penalties, ordering the disgorgement of unlawful gains by violators, restricting companies from raising capital and market participants from participating in the capital market. While the law has widened SEBI's enforcement authority over time, it does not define what kinds of violations will attract which type of enforcement sanction, or lay down proportionality standards for different kinds of violations or violators. In this paper, we use a data-set of over 8,000 enforcement orders passed by SEBI over a span of ten years, to map the manner in which SEBI has used the enforcement powers conferred on it by the law. We find a significant increase in the number of enforcement actions undertaken by SEBI since 2018, and a simultaneous increase in the number of violations settled by SEBI during this time. We also find that SEBI has largely concentrated its enforcement actions against a limited set of violations in the Indian securities market, and directed the bulk of its enforcement powers against unregulated entities. Finally, we find that while SEBI's adjudication process ends in a conviction in an overwhelming majority of cases, it has a poor track record in ascertaining the amount involved in the violation, the unlawful gains made by the violator or the loss caused to investors. Our analysis generates new insights on the overall quality of enforcement in the Indian securities market