To help fast track cases, the market regulator Securities and Exchange Board of India (Sebi) has made the settlement rules more attractive by including confidentiality and lenient terms for approvers, but will not settle cases of defaulters and fugitive economic offenders. Sebi said it would not settle proceedings in cases of alleged default that had market-wide impact, caused losses to a large number of investors, or affected integrity of the market.

The new norms will be effective from January 1, 2019, Sebi said while making public the draft Securities and Exchange Board of India regulations 2018.
From P1

The number of cases being settled over the past few years has gone up and the regulator is keen to follow the route to close cases that are not serious in nature. As many as 200 cases were settled for a total amount of over Rs 30 cr in 2017-18, up from 103 cases for Rs 13.5 cr in 2016-17 and 34 cases in 2015-16 for Rs 4.42 cr.

Under the rules, just one application would be required for settlement of all proceedings that have been initiated or may be initiated and make full and true disclosures about the alleged defaults. The guidelines are based on justice (retired) Anil R Dave panel’s suggestions.

The regulator has also introduced a confidentiality clause and lesser settlement amount for those offering information about an ongoing or possible violation. The identity of applicant seeking confidentiality, information, documents and evidence furnished by the applicant will be treated as confidential.

But identity of the applicant or such information or documents or evidence may 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. Besides, Sebi will also 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. The settlement fees and charges have also been increased, while the amount will be even higher in cases of delayed filing of application.

A settlement plea will not be considered if an earlier application for the same alleged default has been rejected or in cases involving outstanding funds for recovery under securities laws.

In case of withdrawal of a settlement plea, a second chance would be given only if the applicant agrees to pay at least 50 per cent more settlement amount. The regulator will not settle cases involving wilful defaulters, fugitive economic offenders and those having defaulted in payment of fees or penalty imposed under securities laws.

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. It also provide for non-monetary settlement terms, besides a settlement amount and these would include suspension of business activities, exit from management, disgorgement of losses incurred by investors, restraint from being an officer or director, cancellation, reduction or lock-in of shareholding, enhanced audit and procedures.