Sebi excludes insider trading, serious offences from consent norms

Mumbai: Taking a tough stand on insider trading and other serious offences, market regulator Sebi today decided to exclude these violations from the consent order, a window available for settling disputes on payment of a fee.

The modified guidelines, issued by the Securities and Exchange Board of India (Sebi), also said that this window will only apply for offences committed two years prior to submission of application to Sebi for a consent order.

"Certain defaults including insider trading, front running, failure to make an open offer, redress investor grievances and respond to the summons issued by SEBI, are excluded from the consent process," Sebi said.

Besides, serious fraudulent and unfair trade practices, which have caused substantial losses to the investors, will also be kept out of the consent order.

"The new guidelines will give more clarity and transparency to consent order mechanism," SMC Global Securities Research Head Jagannadham Thunuguntla said.

Sebi introduced consent settlement system in April, 2007, with a view to cut down on its costs, time and efforts in taking up the enforcement actions. So far, the regulator has passed more than 1,000 consent orders.

According to the new guidelines, if an applicant has obtained more than two consent orders, he will not be eligible to file consent application for three years from the date of the last order.

As per the new guideline, consent application would not be entertained before the completion of an investigation or inspection, Sebi said.

Besides, for pending proceedings, consent application would be considered only if filed after 60 days from the date of the service of the show cause notice, it added.

"All consent applications shall be accompanied with a non-refundable processing fee of Rs 5,000 per applicant...," Sebi said.

It further said that the High Powered Advisory Committee (HPAC) on consent orders will have the power to enhance or reduce the settlement amount according to the merit of the case or refuse to consider the case under the consent process.

It may also issue directives like disgorgement of ill-gotten profits, among others.

Prior to the new guidelines, Sebi could impose a penalty higher between Rs 25 crore and an amount equivalent to three times the profit allegedly made by the suspected entity through insider trading or other manipulative activity.

The HPAC would consist of a Chairman who shall be a retired judge of a High Court and three other external experts, as may be decided by the board from time to time.

Sebi further said that in case of rejection of the consent application, no subsequent application with respect to the same default would be considered.

"The consent application shall be disposed of expeditiously, preferably within a period of six months from the date of registration of the consent application," Sebi said.


Updated Date: Dec 20, 2014 17:50 PM

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