Streamlining of the consent process

SEBI had issued Circular No.EFD/ED/Cir.-01/2007 dated 20th April 2007, providing the framework for passing of consent orders and for considering requests for composition of offences. On the basis of the experience gained and with the purpose of providing more clarity on its scope and applicability, the circular has been modified.

The salient features of the modified circular are as under:

1. Certain defaults including insider trading, front running, failure to make an open offer, redress investor grievances and respond to the summons issued by SEBI are excluded from the consent process. The defaults falling in the category of fraudulent and unfair trade practices, which in the opinion of SEBI are very serious and/or have caused substantial losses to the investors, shall also not be consented.

2. No consent application shall be considered, if any violation is committed within a period of two years from the date of any consent order. However, if the applicant has already obtained more than two consent orders, no consent application shall be considered for a period of three years from the date of the last order.

3. No consent application shall be entertained by SEBI before the completion of investigation / inspection, if any.

4. In respect of proceedings pending before SEBI, no consent application shall be considered if filed after 60 days from the date of the service of the show cause notice.

5. The consent terms shall be determined in terms of the guidelines (annexed with the above referred circular), which inter alia, provide for the following objective parameters for determining the consent terms:

a) A minimum Benchmark Amount for each category of default attributable to the default/violation for which the show cause notice is issued or may be issued.

b) The Benchmark Amount to take into consideration the penalty imposed by the AO and the order passed by the WTM as the case may be.

c) Additional amounts for previous defaults/track record of the applicant.

d) Weightage given to the stage of the proceeding, nature of the default/violation, gravity of the default/violation, volume traded, price impact, networth, profits made, nature of disclosure not made, its impact, etc.

6. The consent terms may also include other directives viz. disgorgement of ill-gotten profits, etc., if considered necessary.

7. The HPAC/ Panel of WTMs considering the facts and circumstances of the case and the gravity of the charges, may-

(i) enhance the settlement amount in serious cases as per the scheme of the SEBI Act, or

(ii) reduce the settlement amount if the settlement amount is disproportionately higher considering the nature of violation, or

(iii) refuse to consider the case under the consent process.

8. The HPAC shall consist of a Chairman who shall be a retired judge of a High Court and three other external experts.

9. Internal Committee/s, shall comprise of a Chief General Manager not administratively associated with the case and Division Chiefs of the concerned Operational Department and Enforcement Department respectively to assist the HPAC.

10. In case of rejection of the consent application, no subsequent application with respect to the same default shall be considered by SEBI at any stage thereafter.

11. SEBI shall dispose of the consent application expeditiously preferably within a period of six months from the date of registration of the consent application.

The Circular is available on the website: www.sebi.gov.in

Mumbai

May 25, 2012

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