SEBI Penalties for Non-Compliance: Recent Cases and Lessons (2025)

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The Securities and Exchange Board of India (SEBI) has been cracking down on market violations in 2025, sending a clear message to companies, investors, and financial institutions: play by the rules or pay the price. From massive market manipulation schemes to basic compliance failures, SEBI has imposed penalties ranging from warnings to hundreds of crores in fines.

If you’re an investor, business owner, or simply someone interested in how financial markets are regulated, understanding these cases can help you avoid similar pitfalls.

This blog is a breakdown of the major SEBI enforcement actions in 2025.

What is SEBI, and why should you care?

Before diving into specific cases, let’s quickly understand what SEBI does. Think of SEBI as the referee of India’s stock market. Just like a football match needs a referee to ensure fair play, our financial markets need SEBI to make sure everyone follows the rules. When companies or individuals break these rules, SEBI steps in with penalties, bans, and fines to protect regular investors like you and me.

The Biggest Market Manipulation Case: Jane Street Group (July 2025)

The Penalty: ₹4,843 crore (including impounded gains)

This is the biggest case of 2025. Jane Street Group, a major trading firm, was caught manipulating stock market indices. But what does “index manipulation” mean?

Think of a stock market index like a thermometer that measures the overall health of the market. Now imagine someone artificially heating up that thermometer to make it show the wrong temperature. That’s essentially what Jane Street did, but with stocks.

Here’s how it works : By buying and selling specific stocks in a calculated way, they could move the index up or down. This allowed them to profit from trades that bet on where the index would go. It’s like knowing the exam questions before the test while everyone else studies blind.

Lesson: Market manipulation is extraordinarily expensive when you get caught.

The Pump and Dump Scheme: Sadhna Broadcast Limited (May 2025)

The Penalty: ₹58.01 crore in disgorgement plus fines between ₹5 lakh to ₹5 crore

This case involved 59 different entities working together in what’s called a “pump and dump” scheme

Imagine you and your friends buy a bunch of old comic books for cheap. Then you all start spreading rumors that these comics are rare and valuable. You create fake hype, maybe even buy and sell them among yourselves at higher prices to create the illusion of demand. Once the price shoots up and outsiders start buying, you all sell your comics at the inflated price and disappear, leaving the new buyers with worthless items.

That’s exactly what happened with Sadhna Broadcast Limited’s shares. A network of 59 entities artificially inflated the share price, then sold their holdings to unsuspecting investors, leaving them with losses.

Lesson: If an investment seems too good to be true and there’s sudden unexplained hype around it, step back and investigate. SEBI’s action shows they’re tracking coordinated manipulation across multiple entities.

Social Media Manipulation: Darshan Orna Ltd (July 2025)

The Penalty: ₹3.87 crore

This case brings market manipulation into the social media age. Darshan Orna Ltd., along with 11 related entities, used platforms like WhatsApp, Telegram, and Twitter to manipulate their share price.

Here’s how social media manipulation works: The company and its associates would post misleading information, spread false rumors, or create artificial buzz about their stock on social media. They’d use multiple accounts to make it seem like many people were talking about the stock, creating FOMO (fear of missing out) among investors.

It’s like creating fake reviews for a restaurant you own, except instead of food, we’re talking about stocks where people’s savings are at stake.

Lesson: In today’s digital age, just because something is trending on social media doesn’t make it a good investment. Always verify information from official sources before making investment decisions.

Insider Trading: Zee Business Case (July 2025)

The Penalty: ₹4 crore plus a 2-year ban (affecting 4 entities)

Insider trading is one of the most common violations SEBI deals with. In this case, people associated with Zee Business traded stocks based on information they knew would be announced on the channel before the general public knew about it.

Think of it like this: You work at a newspaper and know tomorrow’s headline will announce a major company merger. You buy stocks today before anyone else knows, then sell them tomorrow after the price shoots up following the announcement. That’s insider trading, and it’s illegal because you’re using information not available to other investors.

Lesson: If you have access to non-public information about a company through your work or connections, you cannot trade on that information. The penalties include not just fines but also bans that can end careers in the financial industry.

Mutual Fund Violations: Axis AMC (March 2025)

The Penalty: ₹6.27 crore (settlement)

Asset Management Companies (AMCs) are supposed to follow strict rules when managing mutual funds because they’re handling ordinary people’s investments. Axis AMC failed in “front-running” prevention and proper monitoring.

Front-running is when someone at a fund company places their own trades before executing large orders for the fund, profiting from the price movement those large orders will create. Imagine you’re a warehouse manager who knows your company is about to buy huge quantities of a product, causing shortages. If you buy that product first for personal profit, that’s similar to front-running.

Lesson: Even large, reputable financial institutions must maintain rigorous compliance systems. For investors, this case shows that SEBI is actively protecting your interests in mutual funds.

Banking Violations: HDFC Bank (April 2025)

The Penalty: Administrative warning (no monetary fine)

Not every SEBI action results in a fine. HDFC Bank received a warning for custody non-compliance. While the specifics are technical, essentially the bank didn’t properly maintain or report securities held in custody for clients.

Think of it like a safety deposit box service at a bank. If the bank isn’t keeping proper records of what’s in each box or isn’t following security protocols, that’s a problem even if nothing is stolen. SEBI caught this before it became a bigger issue.

Lesson: Sometimes compliance violations are caught early enough that a warning suffices. However, repeat offenses would certainly result in harsher penalties. Prevention is always better than cure.

Trading Platform Violations: Groww (May 2025)

The Penalty: ₹47.85 lakh

Groww, one of India’s popular investment apps, was penalized for multiple compliance violations on their trading platform. While the specific violations aren’t detailed in the records, platform violations typically involve issues like inadequate KYC (Know Your Customer) checks, improper risk disclosures, or technical glitches that affect fair trading.

For a platform used by millions, even seemingly small compliance gaps can affect many users, which is why SEBI takes these violations seriously.

Lesson: As digital investment platforms grow, regulatory compliance must keep pace with technological expansion. For startups in the fintech space, investing in compliance from day one is crucial.

Exchange Non-Compliance: BSE (June 2025)

The Penalty: ₹25 lakh

Even the stock exchanges themselves aren’t immune to SEBI’s oversight. BSE (Bombay Stock Exchange) was penalized for providing unequal access to corporate disclosures.

Stock exchanges must ensure that all market participants get important company information at the same time. If some people get it earlier than others, it creates an unfair advantage. It’s like some students getting the exam paper a few minutes before others; even that small advantage is unfair.

Lesson: Market infrastructure itself must be fair and transparent. Information equality is fundamental to market integrity.

Brokerage Violations: Axis Securities (February 2025)

The Penalty: ₹10 lakh

Axis Securities faced penalties for regulatory violations related to client fund handling. Brokers are required to keep client money separate from their own and follow strict rules about how they handle your funds.

Imagine giving money to a real estate agent to buy a property, but instead of keeping it safe, they use it for their own business temporarily. Even if they plan to return it, that’s a violation of trust and regulation.

Lesson: Choose brokers carefully and ensure they have clean regulatory records. Your money should be sacrosanct in their hands.

FPI Violations: Three Foreign Portfolio Investors (February 2025)

The Penalty: ₹50 lakh each

Foreign Portfolio Investors (FPIs) are foreign entities that invest in Indian markets. They have investment limits to prevent excessive foreign control. These three FPIs breached those limits.

India has rules about how much foreign money can flow into certain sectors. It’s like a country club that wants to maintain a certain ratio of local to outside members. When FPIs exceed their limits, they’re breaking these rules.

Lesson: International investors must understand and respect local regulations. Ignorance of rules is not an acceptable defense.

Mutual Fund Violations: Nippon Life AMC (August 2024)

The Penalty: ₹2 lakh (AMC) + ₹1 lakh (Trustee)

This case from late 2024 involved violations of TER (Total Expense Ratio) rules. TER represents how much a mutual fund charges investors for managing their money. SEBI has strict rules about these charges to protect investors from excessive fees.

If a mutual fund is supposed to charge a maximum of 2% but sneaks in additional hidden charges, that violates TER rules. It might seem like a small percentage, but over time and across thousands of investors, it adds up significantly.

Lesson: Even small compliance violations in mutual funds are tracked and penalized. For investors, this shows SEBI is watching the fees you’re being charged.

Investigation Non-Cooperation: Capital Finance and Investments LLP (August 2025)

The Penalty: ₹1,00,000

This case is unique because the violation wasn’t market manipulation or trading fraud. Capital Finance and Investments simply failed to appear before SEBI’s investigating authority when asked to do so.

It’s similar to ignoring a court summons. When regulators ask you to cooperate with an investigation, refusing or ignoring them is itself a violation that carries penalties.

Lesson: If you’re ever contacted by SEBI or other regulatory authorities, cooperation is not optional. Avoiding them only makes matters worse and adds additional penalties.

Key Takeaways

Looking at all these cases together, several patterns emerge:

1.Technology Has Changed the Game

From social media manipulation to trading platform violations, modern technology creates new ways to break rules. SEBI is adapting its oversight to catch these new-age violations.

2.No One is Too Big to Penalize

Whether it’s major banks like HDFC, exchanges like BSE, or large asset management companies, SEBI doesn’t hesitate to take action against prominent institutions.

3.Coordination Doesn’t Help

The Sadhna Broadcast case involved 59 entities working together. SEBI caught them all. Attempting to hide behind multiple entities or coordinated schemes doesn’t work.

4.Small Violations Matter

Even an administrative warning or a ₹1 lakh fine makes it to SEBI’s records. There’s no such thing as a violation too small to matter.

5.Prevention is Cheaper Than Cure

The penalties range from lakhs to thousands of crores. Building proper compliance systems costs money, but it’s infinitely cheaper than facing SEBI action.

What This Means for Different Stakeholders

For Individual Investors:

Research before investing; don’t fall for hype

Be cautious of sudden, unexplained price movements

Choose regulated, compliant platforms and advisors

Report suspicious activities to SEBI

For Startups and Businesses:

At The Startup Zone, we often discuss business growth strategies. However, growth must never come at the cost of compliance.

Invest in compliance from day one
Train your team on regulatory requirements
Maintain transparent operations
Seek legal counsel before launching new financial products

Looking Ahead: What to Expect in 2025 and Beyond

Based on these enforcement actions, we can expect SEBI to continue focusing on:

Digital Platform Regulation: As more people invest through apps and online platforms, expect stricter oversight of these platforms.
Social Media Monitoring: SEBI is clearly tracking social media for market manipulation. This trend will only intensify.
Cross-Entity Investigations: The ability to track coordinated manipulation across multiple entities shows sophisticated investigative capabilities.
Foreign Investment Scrutiny: With increasing foreign portfolio investment, expect continued vigilance on FPI compliance.
Mutual Fund Protection: Given India’s growing mutual fund industry, SEBI will remain focused on protecting retail investors in these schemes.

Conclusion

The 2025 SEBI enforcement actions tell a clear story: India’s securities regulator is active, sophisticated, and unforgiving when it comes to market violations. Whether you’re a billion-dollar institution or a small trading firm, the rules apply equally.

For entrepreneurs and business owners exploring growth opportunities at The Startup Zone, these cases offer valuable lessons. Building a sustainable business means building a compliant business. Shortcuts might seem tempting when they promise quick profits, but as these cases show, the cost of non-compliance far exceeds any short-term gains.

Stay compliant, stay informed, and most importantly, stay ethical. That’s the only sustainable path to success in India’s dynamic financial markets.

For more insights on business compliance, startup strategies, and navigating India’s regulatory landscape, visit The Startup Zone.

Disclaimer: This article is for informational purposes only and should not be considered legal or investment advice. For specific compliance questions, consult qualified legal and financial professionals.

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