Analysis of ISO Settlement Scheme, 2024 of SEBI

Introduction: The Securities and Exchange Board of India (SEBI) has unveiled the ISO Settlement Scheme 2024, aiming to address trading irregularities in the illiquid stock options segment of the Bombay Stock Exchange (BSE). This article delves into the scheme’s purpose, mechanics, and its potential impact on involved entities.

Securities and Exchange Board of India (SEBI) has decided to introduce a third Settlement Scheme (hereinafter referred to as “the Scheme”) in the matter of trading activities of certain entities in the illiquid stock options segment of Bombay Stock Exchange (BSE) in terms of Section 15JB of the SEBI Act, 1992 read with Regulation 26 of SEBI (Settlement Proceedings) Regulations 2018 vide SEBI Public Notice dated March 03, 2024.

Purpose of the Scheme

The Scheme would provide a settlement opportunity to all the entities that have executed reversal trades in the stock options in the period between April 01, 2014 and September 30, 2015, against whom proceedings have been initiated and are pending before any authority or forum, viz. Adjudicating Officer/ the Hon’ble Securities Appellate Tribunal (SAT)/ Hon’ble Courts/ Recovery Officer (provided an appeal has been filed and the same is pending before the Hon’ble SAT/Court). By availing the benefit of the scheme, the entities may settle such proceedings and avoid further delay in the conclusion of the said proceedings and the associated long drawn legal processes/ expenses, etc.

Validity of the Scheme:

The Scheme shall commence on March 11, 2024 and end on May 10, 2024 (both days inclusive) or such other date as approved by the Competent Authority.

Application Registration Fees, Legal Costs:

An entity desirous of availing settlement under the Scheme would be required to submit a settlement application along with an application registration fee of ₹25,000/- + GST @18% in case of body corporates and ₹15,000/- + GST @18% in case of individuals in the specified format. The application form shall be uploaded and the payment of application fee and the settlement amount as applicable, determined on the basis of number of contracts, may be accessed by using the following link :  https://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html. There shall be no requirement for submitting any physical documents.

Legal costs of ₹11,500/- along with GST @ 18% shall be required to pay by those applicants against whom adjudication orders have been passed or recovery proceedings have been initiated and appeals have been preferred against such proceedings by the applicant before the Hon’ble Securities Appellate Tribunal or other courts.

The Eligibility criteria under the Scheme:

The Scheme would be applicable in respect of the entities that have executed reversal trades in the illiquid stock options segment of BSE between April 1, 2014 and September 30, 2015 and against whom proceedings have been initiated and are pending before any forum or authority, viz. Courts/ SAT, Adjudicating Officer or Recovery Officer (provided an appeal has been filed and the same is pending before the SAT/Court). Entities against whom orders have been passed levying penalty that has not been paid and against whom recovery proceedings have been initiated, may be eligible for the scheme only if an appeal is filed and the same is pending before the Courts/ SAT.

In case a settlement application has already been filed in respect of the Show Cause Notice issued by the Adjudicating Officer before the Scheme was introduced and is pending, such applicants may visit the link given below, enter their PAN and pay the specified settlement amount to settle the proceedings. They do not need to pay any application fee. Such applicants would however be required to upload the requisite documents as mentioned below: https://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html

List of Documents and details required at the time of submission of settlement application:

(a) Online submission of the following scanned documents:

(i) A copy of duly notarised and stamped undertakings and waivers in non- judicial stamp paper duly paid as per Annexure -2.

(ii) A self-attested copy of the PAN Card of the applicant.

(iii) An application for settlement as per Annexure -1.

b) Payment of the non-refundable settlement application registration fee of ₹25,000/- in case of body corporates and ₹15,000/- in case of individuals, along with GST @ 18%.

c) Payment of the settlement amount as displayed in respect of the applicant.

d) Payment of the legal costs with GST @ 18%, if any, as displayed in respect of the applicant.

Subsequent to the closure of the Scheme, a composite settlement order shall be passed by the competent authority after reconciliation of records.

It is advisable to file a settlement application under the Scheme at the earliest in order to avoid last minute rush. The Scheme would be operational from March 11, 2024 till May 10, 2024. Upon conclusion of the Scheme, actions as per the relevant provisions of securities laws shall be continued against the entities who do not avail this opportunity for settlement under the Scheme.

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Annexure-1

Part-A – FORM

Application for settlement

Before the Securities and Exchange Board of India 

In the matter of trading in the illiquid stock options at Bombay Stock Exchange (BSE) – in terms of the SEBI ISO Settlement Scheme, 2024.

1. Name/Trade name of the applicant/co-applicants:

2. PAN of the applicant:

3. Address/correspondence address, contact number and email:

4. Name and contact details (including e-mail) of the contact person (s):

5. Stage at which pending (Show Cause Notice/Appeal before SAT or Court, whichever applicable):

6. Date of Show Cause Notice/Appeal before SAT or Court (including reference number, wherever applicable):

7. Documents to be uploaded:

(a) Undertakings and waivers (as per Format specified in Annexure 2).

(b) Copy of the PAN

(Signature of the applicant)

(Stamp and Seal of the applicant in case of body corporate along with Signature of the authorised representative(s))

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 Annexure-2

Undertakings and Waivers (Format)

Undertaking on non-judicial stamp paper of denomination of ₹100/- or above to be submitted by each applicant, along with the application with stamp duty duly paid and duly notarized at the time of execution.

I/We,……………………………………………………………………………………………………….., the applicant(s) herein, as a condition for making the enclosed application to the Board for examining and consideration of the application, hereby declare that I/we agree and undertake that:

(1) I/We admit the jurisdiction and right of the Securities and Exchange Board of India to initiate appropriate proceedings in respect of the alleged default.

(2) I/We further agree and undertake that the time spent during the settlement proceedings shall be excluded for computing the limitation period or laches, if any, for initiating or continuing or restoring any legal proceedings, if any, against me/us, and waive any objections in this regard.

(3) The Securities and Exchange Board of India may enforce any claims against me/us arising from or/in relation to any violation of the settlement order passed pursuant to this application.

(4) Nothing in the settlement order shall preclude any other person from pursuing any other legal remedy to which such person may be entitled against me/us as per law.

(5) The settlement proposed by me/us does not limit or create any private rights or remedies for any person who is not a party to these proceedings, against me/us.

(6) The settlement amount including legal expenses, if any, shall be paid by me/us to the Board within the period stipulated by the Board.

(7) The settlement order shall be construed and enforced in accordance with the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018, as amended from time to time.

(8) I/We agree that subsequent to the passing of the settlement order, I/We shall not take any action or make or permit to be made any public statement denying, directly or indirectly, any finding of the Board including that recorded in the settlement order or creating impression that the settlement order is without factual basis.

(9) I/We hereby declare that nothing in the waiver and undertaking given by me/us shall affect my/our (i) testimonial obligations, or (ii) right to take legal or factual positions in defence of litigation or in defense of a claim or in any other legal proceeding in which the Board is not a party.

(10) I/We for the limited purpose of settlement under these regulations ‘admit the findings of fact and conclusions of law’ or ‘neither admit nor deny the findings of fact and conclusions of law’ (strike off whichever is not applicable), and agree to abide by the settlement order as may be passed in accordance with the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 and guidelines and circulars issued by the Board in that regard:

Provided that, in relation to defaults related to disclosures other than relating to a prospectus or a letter of offer or a similar such document required to be made in relation to an issue of securities, I/we do not deny the alleged default.

(11) I/We waive my/our right of taking any legal proceedings against the Securities and Exchange Board of India concerning any of the issue covered in the settlement order that may be passed.

(12) I/We further waive the following:

(a) the findings of fact and conclusions of law;

(b) the proceedings before the Board or any officer of the Board;

(c) the right to all post-hearing procedures;

(d) appeal/review before the Tribunal/courts;

(e) any plea relating to such provisions of the regulations or other requirements of law, including conflict of interest, as may be construed to prevent any member or officer of the Securities and Exchange Board of India from participating in the proceedings, including settlement proceedings or assisting or advising the Internal Committee, High Powered Advisory Committee or Panel of Whole Time Members, as to, any order, opinion, finding of fact, or conclusion of law, etc.;

(f) any plea of bias or pre-judgment by the Securities and Exchange Board of India, the officers or the High Powered Advisory Committee, based on the consideration of or discussions concerning settlement of all or any part of the internal proceedings; and

(g) any plea of limitation or laches for initiating or restoring of the proceedings, if the applicant violates the settlement order.

(13) I/We undertake as a condition of settlement to not seek, directly or indirectly, any set-off, reimbursement by way of indemnification, insurance coverage or any other form of non-tax reimbursement.

(Signature of the applicant with stamp and seal of the body corporate)

Before me. Notary.

Weblink and source of information

1. https://www.sebi.gov.in/ISO_Settlement_Scheme.html

2. https://www.sebi.gov.in

Conclusion: SEBI’s ISO Settlement Scheme 2024 emerges as a strategic initiative to streamline adjudication processes and foster regulatory compliance within the Indian securities market. Its implementation underscores SEBI’s commitment to maintaining market integrity while providing a structured avenue for dispute resolution. However, the efficacy of the scheme hinges on active participation and adherence to prescribed protocols by concerned entities.

By analyzing the scheme’s mechanics, eligibility criteria, and potential ramifications, stakeholders can glean insights into its operational dynamics and make informed decisions regarding participation. As the scheme unfolds, its impact on market participants and broader regulatory frameworks will become apparent, shaping the trajectory of securities regulation in India.

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The Author can be contacted at email id roopalcs2001p@gmail.com.

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