The Securities and Exchange Board of India (Sebi) will allow fast-track settlement of cases where the settlement amount is below Rs 10 lakh, as part of a series of changes aimed at simplifying and speeding up its settlement mechanism.
Under the revised framework, cases involving settlement amounts of less than Rs 10 lakh can move directly from Sebi’s internal committee to a panel of whole-time members, shortening the settlement process.
For certain violations, Sebi will issue a notice specifying the settlement amount, allowing the entity concerned to settle the proceedings by paying the amount mentioned in the notice. The mechanism will also cover cases involving misrepresentation of financial statements and diversion or siphoning of funds.
The regulator has also introduced a new formula for calculating settlement amounts. The base minimum penalty will be multiplied by a factor called SRGAM, which takes into account the stage of proceedings (S), regulatory action (R), gravity of the default (G) and aggravating factors (A), while deducting mitigating factors (M). Legal costs will then be added to arrive at the final settlement amount.
Sebi also clarified that wrongful gains will not be factored into the base penalty, eliminating the existing possibility of double counting such amounts.
Among other relaxations, the regulator has increased the time available to respond to a show-cause notice to 90 days from 60 days. It will also allow entities to file a settlement application within 60 days before the issuance of a show-cause notice.
Sebi has also provided a one-time 90-day window from the implementation of the revised regulations for entities involved in existing cases to seek settlement. The window will be available to entities that have never applied for settlement earlier, as well as those whose previous applications were rejected, withdrawn or returned. Such entities will have to pay an additional 20% over the applicable settlement amount.
The window will also cover cases where the grounds on which an earlier settlement application was rejected no longer exist.
The regulator said corrective measures and remedial and regulatory terms (RRTs) will not be imposed in adjudication proceedings. However, where Sebi has already quantified wrongful gains, losses avoided or losses caused to investors, such amounts can still be ordered to be disgorged.
In other moves, FPIs will be allowed to participate in non-agricultural index derivative contracts, irrespective of whether the underlying is cash-settled, as well as non-cash-settled non-agricultural commodity derivative contracts.
However, FPIs trading in non-cash-settled non-agricultural commodity derivatives will have to exit their positions before any delivery obligation arises.