Sebi moots overhaul of consent settlement rules

The Securities and Exchange Board of India has proposed an overhaul of the framework governing consent settlements to make the system more efficient. Under the consent settlement, an alleged wrongdoer can settle a pending matter with Sebi without admission or denial of guilt by paying a settlement fee.

Markets regulator Securities and Exchange Board of India (Sebi) has proposed an overhaul of the framework governing consent settlements to make the system more efficient.

Under the consent settlement, an alleged wrongdoer can settle a pending matter with Sebi without admission or denial of guilt by paying a settlement fee. This system has proved an effective alternative to enforcement process as it saves time and resources of both Sebi and corporates.

The new framework, suggested in a discussion paper, aims to cut down the timeline for settlement of applications from 180 days to just 60 days, and rationalise the fee structure.

At present, a settlement application can be filed within 60 days of the date receipt of the show-cause notice. However, an additional 120 days can be availed of by the noticee, provided they pay 25 per cent extra over the settlement amount. Sebi has suggested doing away with the additional time.

“Such delays not only do not serve the purpose of the enforcement process but also impede the expeditious disposal of the enforcement proceedings. It is, therefore, proposed that the additional time period of 120 days with payment of additional settlement amount may be done away with,” the regulator has said.

Further, the time given to submit revised settlement terms are also proposed to be cut to just 15 days. The current provision allows 10 days plus an additional 20 days.

“The extended period of 20 working days…is often misused by certain entities as a procrastinating tactic and delay the conclusion of the enforcement process,” Sebi has said.

Also, Sebi has proposed providing only 30 days for remitting the settlement amount. At present, the regulator allows 60 days, but levies simple interest of 6 per cent per annum for the delay.

“Additional time for payment of settlement amount with interest is hardly used by the applicant. Thus, a period of 30 days from the time of issuance of the notice of demand is more than sufficient for remittance of the settlement amount,” The regulator has said.

Further, the markets watchdog has proposed reducing the so-called proceeding conversion factor (PCF) value to encourage filing of settlement applications during the early stages of the proceedings.

The settlement process was codified through the Sebi Settlement of Administrative and Civil Proceedings Regulations, which were notified in January 2014.

Sebi has invited public feedback on the discussion paper on settlement regulations until October 14.