Markets regulator Sebi on Monday suggested a fresh set of norms regarding settlement of administrative and civil proceedings against suspected market defaulters, except in cases of serious violations like illicit pooling of funds from investors, insider trading and fraudulent and unfair trades.
The list of violations that can’t be settled has been expanded widely under the new norms, which also allows the involved entity to file a settlement plea within 60 days of the Show Cause Notice served by Sebi.
Sebi has further recommended that a plea to settle pending cases, upon payment of settlement charges and related costs, will not be considered if the applicant has already been party to two earlier settlements.
Besides, cases already pending before a court or tribunal can’t be settled under the new norms.
An entity can’t seek settlement of any proceedings if the alleged default has been committed within two years of an earlier settlement involving them.
It added that settlements can’t be sought for cases involving non-compliance to Sebi orders, violations to the open offer requirements, listing disclosure norms, front running, sharing of unpublished price sensitive information, manipulative practices of mutual funds and failure to redress investor grievances, among other serious offences.
In a consultation paper issued by the markets regulator titled ‘Draft Sebi (Settlement of Administrative and Civil Proceedings) Regulations, 2013’, it said that the terms of settlement may include payment of a settlement amount and other related costs, voluntary suspension of registration, closure of business and other appropriate directions.
It said that the settlement amount will be credited to Consolidated Fund of India, while legal costs will go to the Sebi General Fund. The disgorged illegal gains, if any, will be credited to the Investor Protection and Education Fund of Sebi, the regulator added.
It has invited public comments on the draft norms by October 30, 2013.
The new norms have been proposed pursuant to promulgation of the Securities laws (Amendment) Second Ordinance, 2013 by the President last month, which conferred explicit powers on Sebi to settle administrative and civil proceedings under relevant sections of the Sebi Act, the SCRA Act and the Depositories Act.
The Ordinance provides that Sebi, after considering the nature, gravity and impact of defaults, can agree to the proposal for settlement, on payment of certain charges and compliance to other terms and conditions.
While a consent mechanism is already in place at Sebi for settlement of cases involving certain alleged violations, the new norms will give wider powers to Sebi for settlement of administrative and civil proceedings within a legal framework.