The Securities and Exchange Board of India (Sebi) has proposed to revise the settlement rules to align them with the specific nature of violations done by entities, in a bid to make the mechanism more effective.
The regulator has proposed to revise the timelines and rationalise the fee structure for settlements– an application involveing an out-of-court resolution of securities law violations. It is negotiated between the regulator and the entity concerned, without admission guilt and without denial of liabilities, and involves the payment of a fee.
The time period for filing settlement applications is proposed to be shortened from 180 days to 60 days.
At present, entities are provided a window of 180 days in total to apply for settlement after receipt of the notice to show cause.
“On most occasions, the applicants apply for settlement towards the end of this timeframe. Such delays not only do not serve the purpose of the enforcement process but also impede the expeditious disposal of the enforcement proceedings,” Sebi said in its discussion paper on Tuesday.
The proposals, if implemented, will change the way settlement is done for securities law violations, said Sumit Agrawal, Partner, Regstreet Law Advisors & former SEBI Officer.
“The consultation paper has suggested changes in calculation of base value for settlement amounts, tinkering with multiplying factor and mitigating factors and providing more discretion to Internal Committee and High Powered Advisory Committee (HPAC) to arrive at settlement terms,” he said.
Some securities lawyers are not in favour of Sebi’s new proposal.
“This should not be adopted. Instead, there should be no time period barring a person from filing, because on an enforcement proceeding lasts over 5 years, not counting time taken in appeals which can be another 10 years,” said Sandeep Parekh, founder, Finsec Law Advisors.
The regulator has also proposed to revise the time given to submit revised settlement terms to 15 days from the current 20 days.
“The extended period of 20 working days..is often misused by certain entities as a procrastinating tactic and delay the conclusion of the enforcement
