Seeking to put in place a stringent settlement mechanism, Sebi has decided to bar wilful defaulters, fugitive economic offenders as well as entities responsible for defaults that have “market wide impact” from settling proceedings. Besides, the regulator would not consider any application for settlement which had been rejected earlier for the same alleged default. The changes to the settlement mechanism were approved by the board of Sebi at its meeting here Tuesday. These are based on recommendations made by the panel, headed by retired Justice A R Dave, that reviewed the existing settlement mechanism in SEBI.
The Sebi (Settlement Proceedings) Regulations, 2018, provides for settling proceedings by issuing an order that can include monetary as well as non-monetary terms. According to the regulator, proceedings would not be settled if the “alleged default has market wide impact, loss to investors or affects the integrity of the market”.
Applications for settlement by wilful defaulters, fugitive economic offender and those who have defaulted in payment of any fees due or penalty imposed under securities laws would not be entertained. “A new provision dealing with ‘settlement with confidentiality’ to any person that provides material assistance to the Board in its fact-finding process and proceedings has been specified,” Sebi said in a release.
Further, the watchdog would not consider applications related to same alleged defaults that have been rejected. This would also be applicable in case an audit or investigation, inspection or inquiry is not complete as well as in instances where recovery proceedings have been initiated.
“In the event of a settlement order being revoked on account of non-compliance with the terms of the order or not making full and true disclosures, the settlement amount paid shall not be refunded to the applicant,” the release said. In case the High Powered Advisory Committee’s recommendations are rejected, then the panel of whole time members would have put the reasons for the same on record.
Among others, the committee had suggested that the government may be requested to amend the Income Tax Act, 1961. This is to remove the deduction as a business expense for amounts paid in pursuance of a composition or a settlement under the securities laws.