Why do we need deterrent provisions to regulate the securities markets? This article dwels on the need for deterrent provisions and the current regulatory framework in India.

Do we need deterrent provisions to regulate the securities market? To answer this, It is first necessary to determine what is meant by a deterrent provision. A deterrent provision, simply put, is one which discourages the doing of an act by fear of imposition of a severe penalty or punishment. It is like holding out a big stick.

While regulating the securities market, any regulator in any country will be faced with both civil and criminal offences. As far as criminal offences are concerned, there are sufficient criminal laws available in every country, like the IPC in India. The Sebi's Act also contains Section 24 which provides for criminal prosecution for contravention of the provision of Sebi's acts, rules and regulations.

What really concerns a regulator is whether there is a need for deterrent provisions to regulate the securities market in relation to civil offences, i.e., offences of disclosure that may be routine but are exceedingly important. Do we require very stringent deterrent provisions for their violation? Before we come to that, we must ask ourselves two questions: What determines the need for deterrent provisions? Is it the level of maturity of the securities market that is being regulated or is it the very nature of the securities market?

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