SEBI is also proposing changes to reduce the weight of some aggravating factors and increase the scope for mitigating factors
The Securities and Exchange Board of India (SEBI) has proposed a major overhaul of its settlement framework, replacing the 2018 regulations with a new set of rules aimed at reducing litigation and making it easier and faster for entities to settle enforcement proceedings.
These changes include a simpler formula for calculating settlement amounts, a fast-track mechanism for cases up to â‚ą10 lakh, a settlement notice before a show-cause notice (SCN), a longer 90-day window to apply for settlement, and another opportunity to settle at a later stage if an earlier application was rejected.
The move comes after SEBI studied settlement applications filed over the past two years that were rejected or withdrawn, and found that the proposed settlement amounts were, on average, about eight times the penalty eventually imposed. This gap is expected to come down to about four times under the proposed framework.
SEBI has proposed a new method for calculating settlement amounts that takes into account the stage of proceedings, the nature of the violation, aggravating and mitigating factors and the applicable base amount. SEBI is also proposing changes to reduce the weight of some aggravating factors and increase the scope for mitigating factors.
The markets regulator has also proposed a fast-track settlement route for cases involving settlement amounts of up to â‚ą10 lakh, provided no non-monetary terms are involved. Such cases would not need to go before the High Powered Advisory Committee and would move from the Internal Committee directly to a panel of Whole-Time Members.
Except for cases involving prosecution and specified fast-track cases, SEBI would inform an entity of the probable charges and give it 60 days to apply for settlement before issuing a show-cause notice.
The time available to apply for settlement after an SCN would also rise from 60 days to 90 days. Applicants whose earlier settlement requests were rejected could get another opportunity at a later stage if the circumstances behind the rejection have changed, subject to an additional 20 per cent settlement amount.
SEBI has also proposed to reduce the additional amount for refiling after withdrawal from 50 per cent to 20 per cent, remove the additional 20 per cent charge for certain multiple proceedings, and standardise interest on disgorgement.
“The above proposals are justified in the light of the generally accepted principle that settlement produces faster, more practical and economically sound results than prolonged litigation. Hence, it should be simpler, less discretionary and easy to implement,” SEBI said, inviting public comments by September 4.
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