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.

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