SEBI seeks to overhaul settlement framework; plans fast-track route for cases up to Rs 10 lakh

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The Securities and Exchange Board of India (SEBI) on Friday proposed to overhaul of its settlement framework to reduce certain settlement charges and making the settlement of enforcement proceedings simpler, faster and more predictable, according to news agency PTI.

Why is SEBI planning to do this?

The move comes after the market regulator consulted stakeholders and reviewed settlement applications filed over the last two years. It found that in cases where settlement was rejected or withdrawn and enforcement proceedings subsequently resulted in penalties, the settlement amounts proposed were, on average, about eight times the penalties finally imposed, as per PTI.

Under the proposed framework, the ratio could half and reduce to around four times, SEBI said, adding that the revised approach would retain deterrence while making settlement more attractive.

Fast-track mechanism

SEBI plans to introduce a fast-track route for settlements involving amounts of up to Rs 10 lakh. These settlement would not require a meeting of the High Powered Advisory Committee (HPAC) but would move from the Internal Committee directly to a panel of Whole Time Members.

The existing summary settlement process for specified violations would also be retained as part of the proposed fast-track framework. Once the applicant makes the required payment, the settlement order would be passed by the competent authority before whom the proceedings are pending. If no proceedings are pending, the order would be passed by the panel of Whole Time Members, according to PTI.

Reducing charges

SEBI has proposed to scrap the additional 20 per cent settlement charge in multiple-proceeding cases involving the same noticees which are settled together.

Besides, it has proposed linking settlement amounts to the minimum penalty prescribed under securities laws and said wrongful gains or investor losses would not be included in the base amount, but would continue to be recovered separately through disgorgement.

In case of faults, the regulator aims to establish clearer rules for calculating the number of defaults and multiple failures to make event-based disclosures arising from a single event would be treated as one count of default, as per PTI.

SEBI has invited public comments until September 4 on the proposals.

(With inputs from PTI)