Sebi may reduce time to file consent pleas TWEAKING THE RULE
The Securities and Exchange Board of India (Sebi) is planning to tweak the consent mechanism framework, used by alleged wrongdoers to settle the cases pending with the market regulator.
Sources say Sebi might reduce the time frame to file such applications from two months to just two weeks. According to the current norms, an entity has to submit a consent plea in less than two months after being served with a show-cause notice.
Under the consent mechanism, an alternative dispute redressal tool, an alleged wrongdoer without accepting or denying the guilt settles the matter by accepting penal action. The provision is used to cut tedious and time-consuming legal proceedings. The objective of reducing the application deadline is to expedite the consent settlement process.
Sources said Sebi would accept consent applications after the stipulated 15 days provided the applicant gives a valid reason for the delay. Further, the applicant may have to pay interest for the period of delay along with the settlement amount. A circular in this regard will be issued this month, a source said.
The market regulator had been concerned about the delay and Sebi officials were under pressure to clear pending cases in a fair and timebound manner, sources said. Typically, the whole consent process takes between six and eight months. After an entity files for consent, the terms of settlement offered by the applicant are placed before Sebi's high-powered advisory committee (HPAC), which is headed by a retired high court judge and three other experts.
After analysing all the facts | Plans to reduce time frame for filing consent plea to 15 days from 60 days | Currently, an entity has to file consent plea within 2 months after being served with a show-cause notice | Sebi would seek valid reason for delay if it is not filed within stipulated period | Applicant may have to pay interest for the period of delay along with the settlement amount and circumstances of the case, the HPAC makes its recommendations on whether the application should be accepted. Thereafter, a panel of two whole-time Sebi members considers the recommendations and take a final decision. However, legal experts say there is scope for further improvement in the framework. Also, data provided by Sebi shows not many cases are getting settled through this route due to lack of clarity.
“This would definitely expedite the consent process. But at the same time, Sebi’s consent committee should also fast-track the proceedings and conclude the matter in a time-bound manner,” said Sandeep Parekh, founder, Finsec Law Advisors.
During 2016-17, Sebi had received 171 applications and settled 103 applications by passing orders under the consent and compounding category. The total settlement amount for these cases was just ~13 crore. In FY16, about 177 consent applications were received by the market regulator. This was far cry compared from the 600 consent applications that the market regulator in the first three years after the consent route was introduced.