Sebi introduces new admin regulations, refuses settlement of serious offences

Mumbai: Entities charged with serious offences like illegal money pooling, insider trading and

fraudulent trades will not be able to settle these cases any more after Sebi today notified a stricter set of settlement norms.

Making things even worse for such offenders, the new regulations have been notified with retrospective effect from April 20, 2007 – the day when Sebi’s existing consent settlement system was introduced.

The new norms Sebi (Settlement of Administrative and Civil Proceedings) Regulations, 2014, provide for guiding factors for dealing with the settlement process, while serious offences such as insider trading are excluded from the scope of settlement.

The list of violations that cannot be settled have been expanded widely under the new norms, which also provide for the involved entity to file settlement plea within 60 days of the show-cause notice served by Sebi.

The market regulator has said 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 cannot be settled under the new norms.

Also, settlements cannot be sought for cases involving non-compliance to Sebi orders, violations to the open offer requirements, listing disclosure norms, front running, sharingof unpublished price-sensitive information, manipulative practices of mutual funds, and failure to redress investor grievances, among other serious offences.

The new norms also provide the minimum amount to be paid by the entities which vary as per the charges against them.

In order to impart transparency in the process, the roles of the internal committee and high powered advisory committee are specifically defined, while the regulations also provide for terms of settlement in monetary as well as non-monetary terms or combination of both.

According to new norms, terms of settlement might include payment of a settlement amount and other related costs, voluntary suspension of registration, closure of business, and other appropriate directions.

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 tothe Investor Protection and Education Fund of Sebi.

According to new regulations, Sebi constituted a high-power advisory committee, comprising a retired judge of a High Court and three external experts from the securities market or areas connected to it, to consider matters for settlement of defaulters.

In case of defaults related to Collective Investment Scheme, mutual fund, Alternate Investment Fund, the settlement amount will be recovered from the promoter or Collective Investment Management Company (CIMC)and from trustees or Asset Management Company (AMC) or manager in case of defaults by AMCs or Mutual Fund.

“In case the CIMC or AMC, the investment decisions have caused wrongful loss to the investors, the CIMC or AMC, etc, shall be required to make good such loss, to the investors,” Sebi said.

PTI