Sebi tightens settlement regulations

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The Securities and Exchange Board of India (Sebi) has made various amendments to existing norms for settlement of administrative and civil proceedings in order to streamline and strengthen the settlement process. (PTI)

Excessive delays in filing applications to settle cases will attract higher charges, Sebi has said as part of making settlement regulations stricter. Besides, settlement notice would be issued before issuance of a formal show cause notice, except those that are excluded from settlement. The Securities and Exchange Board of India (Sebi) has made various amendments to existing norms for settlement of administrative and civil proceedings in order to streamline and strengthen the settlement process.

With the amendments, Sebi has power to charge interest in case of excessive delays in filing of applications or payment of settlement amount. Among others, re-application of rejected or withdrawn applications in deserving cases, subject to payment of additional fees and interest, has been permitted.

In a notification, Sebi said a panel of whole time members can consider a settlement application if it is satisfied that there was sufficient cause for not filing it within specified time period and it is accompanied with an application for condonation of delay and non-refundable fees.

In case the application is filed after 60 days of expiry of specified time period, the settlement amount would be increased with a levy of 6 per cent interest per annum. Currently, Sebi does not consider any settlement application if the alleged default was committed in 24 months from the date of the last settlement order where the applicant was a party.

Now, Sebi said such application would be considered in exceptional circumstances, such as the lapse of time since the commission of the alleged default and the weight of evidence against the applicant.

In case a Sebi panel has accepted the recommendation to pass a settlement order, the applicant will have to remit the settlement amount within 15 days from the date of receipt of the notice of demand, “which may be extended by the panel of whole time members for reasons to be recorded, by a period of 15 calendar days”.

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However, such remittance would not be accepted after 19th day from the date of the receipt of the notice of demand.

Further, Sebi said that if the settlement amount is remitted after 30 days from the date of receipt of the notice of demand on or before the 19th day from such receipt, the settlement amount will be increased with 6 per cent interest per annum and/or the applicant will have to give it in writing to abide by other settlement terms within the time given.

Sebi has also modified its PCF value — assigned on the basis of the stage of the proceedings — for settlement proceedings.

The regulator said wherein Adjudicating Officer has already awarded penalty to the applicant, then B — benchmark amount — will be equal to the amount calculated under Sebi norms or the penalty awarded by the AO, whichever is higher.

The benchmark amount is the amount which is attributable to the alleged default for which a proceeding under securities laws may be or has been initiated by Sebi. In case more than one proceeding arising from the same cause of action has been initiated against the applicant, the Indicative Amount (IA) will be increased by 15 per cent.

Sebi said IA will have to be calculated for each applicant. In a case where multiple applicants apply in respect of a default arising from the same cause of action, the IA will be calculated for each applicant, as per the applicable formula.

However, the applicant will be considered to have joint and several liability in cases wherein acquirer and persons acting in concert (PAC) under the Takeover Regulations and in case of directors, whereby they have acted collectively for an act of the company.

Sebi said a settlement notice would be issued “except in cases which are excluded from settlement, a settlement notice indicating the substance of the charges and probable actions may be issued in advance of the notice to show cause so as to afford an opportunity to file a settlement application, within 15 days from receipt of the settlement notice”. Every applicant will have to pay processing fees of Rs 10,000 and application for condonation will be accompanied with additional processing fees of Rs 2,000.

This article was sourced from http://transferfactornews.com