Interestingly I can no longer find this scenario mentioned in the laws, I am guessing it has been moved to somewhere obscure. It used to be mentioned under Foul Play.
If the offence occurs before you have blown your whistle, deal with it there and then. That would be a card for me.
If the offence happens after you blow your whistle, then yes a penalty restart might be appropriate.
I have given two retakes at penalties this season for defenders waving their arms above their heads.
In both cases the kick missed and I gave a retake 10m forward.
Players were perplexed; their coach wasn't and gave them a bollocking.