SEBI Issues New Norms On Settlement Mechanism

Mumbai, December 5: In order to make the settlement rules more attractive to help fast-track pending cases, the market regulator, Secrutiy exchange board of India (SEBI), has issued new norms including a confidentiality clause for the approvers. However, it has notified that it will not settle cases of defaulters and fugitive economic offenders.

The new norms will be effective from January 1, 2019.

As many as 200 cases have been settled by SEBI in the year 2017-18, accounting for a sum of 30 crores. The number of cases being settled by SEBI over the years has gone up. In 2015-16 and 2016-17, it settled only 103 and 34 cases respectively.

On the suggestions given by Justice (retired) Anil R Dave panel, SEBI notified that the applicant shall make one application for settlement of all the proceedings that have been initiated or may be initiated in respect of the same cause of action.

In a move to protect the identity of the applicant, a confidentiality clause has also been included wherein their information, documents, and evidence will be treated as confidential. But the identity of the applicant or such information or documents or evidence will not be treated as confidential if the disclosure is required by law or the applicant has agreed to such disclosure in writing or there has been a public disclosure by the applicant.

Under the rules, the Board will not settle any specified proceeding, if it the audit or investigation in respect of any cause of action, is not complete. However, the Sebi will give an opportunity to an entity facing possible charges and enforcement actions in certain cases to file a settlement application within 15 days of such a notice. If an entity fails to file a plea after Sebi’s settlement notice, any further settlement attempt will be permitted only after the proceedings are completed at the regulator’s end and the matter is pending before a court or a tribunal.

SEBI will also constitute a High Powered Advisory Committee for consideration and recommendation of the terms of the settlement. The High Powered Advisory Committee will consist of a Judicial member who has been the Judge of the Supreme Court or a High Court and three external experts having expertise in the securities market.

The settlement fees and charges have also been increased. In case of withdrawal of a settlement plea, a second chance would be given only if the applicant agrees to pay at least 50 percent more settlement amount. A settlement plea must be filed within 60 days of a show-cause notice and within 120 days in exceptional cases having sufficient cause for delay, in which case the amount would increase by 25 percent.

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