The SEBI (Settlement Proceedings) Regulations, 2018 was issued to provide for the terms of settlement and the procedure of settlement and matters connected therewith or incidental thereto and it is effective since 1st January 2019. It is not applicable in the case of proceedings pending before the Tribunal or any court.
The regulation has defined the term ‘specified proceedings’, this can be read as:
| Specified Proceedings means:
proceedings that may be initiated by the Board or proceedings that may have been initiated & pending before the Board or any other forum |
(for violation of securities laws)
Under SEBI Act, 1992 – Section 11 Functions of Board – Section 11B Power to issue Directions – Section 11D Cease and desist proceedings – Section 12(3) Suspend/Cancel registration – Section 15-I Power to adjudicate Securities Contract Regulation Act, 1956 – Section 12A Power to issue direction – Section 23-I Power to adjudicate Depositories Act, 1996 – Section 19 Power of Board to give directions in certain cases – Section 19H Power to adjudicate (as the case may be) |
Who can file application/Filing of Application to settle default or specified proceeding
A person against whom any specified proceedings have been initiated and are pending/ may be initiated
- Application Part A, Schedule I
- non-refundable application fee- Part B, Schedule I
- undertakings and waivers-Part B, Schedule I
- complete disclosure in respect of alleged default
- one application for same cause of action/all proceedings
In case all the above details are not provided and application filed is not found in compliance with regulation, it shall be returned to the applicant.
The applicant have 15 days’ time to file the revised application, thereafter no further opportunity provided in regulation to file the application at the same stage of proceeding (Schedule II, Table I).
To settle to default related to the disclosure, application shall be made after making disclosure.
The application pending before the Board/SEBI, shall not be considered, in case it is made after the expiry of;
- After 60 days of servicing show cause notice or
- After 60 days of servicing supplementary show cause notice
Application for settlement of any specified proceedings shall not be considered, in case:
- an earlier application for same alleged default had been rejected
- for any cause of action an audit/investigation/inspection/ inquiry, if any, is not complete except in case of applications involving confidentiality
- monies due under an order issued under securities laws are liable for recovery under securities laws
For settling any specified proceeding, the Board/SEBI may inter alia take into account the following factors;
- whether the applicant has refunded or disgorged the monies due
- applicant has provided an exit or purchase option to investors
- applicant is in compliance with securities laws or any order or direction passed under securities laws
- any other factor as may be deemed appropriate by the Board
Application may be rejected at any time, where the applicant who has:
- refuses to receive or respond to the communications
- not submitted/ delays the information submission/ document/Revised Settlement Terms
- required to appear but not appeared before the Internal Committee on more than 1 occasion
- violates in any manner the undertaking and waivers (Part C, Schedule I)
- not remit the settlement amount within 30 calendar days of demand notice and/or not abide by the undertaking and waivers
- fails to comply with the pre-conditions for settlement within time specified by Internal Committee
The application can be withdrawn at any time before receiving the communication of the Panel of Whole Time Members decision and applicant is not allowed to make another application for same default (this may be considered with recommendation of High Powered Advisory Committee).
Effect of Filing Application/What Happens when application filed:
- The filing of an application for settlement of any specified proceedings then- it not affects the continuance of the proceedings but final order shall be kept in abeyance till the application is disposed of.
- Where the application is filed for proceedings that may be initiated against the applicant then- such proceedings shall not be initiated till the application is rejected or withdrawn
The filing of an application not prohibit the initiation of any proceedings so far it is deemed necessary for the purpose of issuance of interim civil and administrative directions to protect the interests of investors and to maintain the integrity of the securities markets.
Board (SEBI) may not settle any specified proceeding, if it is of the opinion that the alleged default has;
- market wide impact
- caused losses to a large number of investors
- affected the integrity of the market
- where the applicant is a wilful defaulter, a fugitive economic offender or has defaulted in payment of any fees due or penalty imposed under securities laws.
Procedure for settlement of proceedings
| Proceedings before the Internal Committee (IC).
Application referred to Internal Committee to examine; whether the proceedings may be settled and if yes, determine the settlement terms |
IC may:
– call relevant information, documents, etc., – call for the personal appearance – ask to comply with pre-conditions to consider settlement – permit submission of revised settlement terms |
Proposed settlement terms placed before the High Powered Advisory Committee (HPAC) |
| HPAC considers the proposed settlement terms with the following;
– application – undertaking and waivers – factors specified (regulation 10) – proposed settlement/ revised settlement terms – any other relevant material |
It may ask to revise the settlement terms and refer the application back to the IC | Recommendations placed before the Panel of Whole Time Members |
| Panel of Whole Time Members (PWTM) consider the recommendations of HPAC and may accept or reject the same | In case HPAC’s recommendation rejected, PWTM;
– record reasons of rejection and – communicate to applicant – return application for re-examination In case HPAC’s recommendation accepted, the applicant; – receive demand notice – remit settlement amount – undertake in writing to abide by the settlement terms |
|
The SEBI (Settlement Proceedings) Regulations, 2018 has 34 regulations divided into 11 Chapters and 4 Schedules.
CHAPTER I PRELIMINARY
- Short title and commencement
- Definitions
CHAPTER II APPLICATION FOR SETTLEMENT
- Application
- Limitation
CHAPTER III SCOPE OF SETTLEMENT
- Scope of settlement proceedings
- Rejection of application
- Withdrawal of application.
- Effect of pending application on specified proceedings
CHAPTER IV TERMS OF SETTLEMENT
- Settlement terms
- Factors to be considered to arrive at the settlement terms
CHAPTER V COMMITTEES
- High Powered Advisory Committee.
- Internal committee(s).
CHAPTER VI PROCEDURE OF SETTLEMENT
- Proceedings before the Internal Committee.
- Proceedings before the High Powered Advisory Committee
- Action on the recommendation of High Powered Advisory Committee.
CHAPTER VII SUMMARY SETTLEMENT PROCEDURE
- Summary settlement procedure
CHAPTER IX SETTLEMENT WITH CONFIDENTIALITY
- Settlement with confidentiality.
- Confidentiality and assurance.
- Confidentiality
CHAPTER X SETTLEMENT ORDERS
- Settlement of proceedings before the Adjudicating Officer and the Board.
- Settlement of the proceedings pending before the Tribunal or any court.
- Service and publication of settlement order.
- Settlement Schemes.
- Effect of settlement order on third party rights or other proceedings.
- Revocation of the settlement order
CHAPTER XI MISCELLANEOUS
- Confidentiality of information.
- Power to remove difficulties.
- Irregularity in procedure
- Relevance of these regulations in specified proceedings
- Procedure for composition.
- Repeal and savings
SCHEDULE-I
Part-A FORM Application for settlement
Part-B Fees
Part-C Undertakings and Waivers
SCHEDULE-II
CHAPTER I GUIDELINES FOR ARRIVING AT SETTLEMENT TERMS
Chapter II INDICATIVE AMOUNT AND THE SETTLEMENT AMOUNT
CHAPTER III PROCEEDING CONVERSION FACTOR
CHAPTER IV REGULATORY ACTION FACTOR -VALUE FOR ALL ORDERS AND REGULATORY DIRECTIONS
CHAPTER V APPLICABLE BASE VALUES AND FACTORS
CHAPTER VI APPLICABLE BASE AMOUNT
CHAPTER VII REPETITIVE NATURE OF DEFAULT
Schedule III Formats
SCHEDULE IV Application for confidentiality
References:
1. SEBI Website/www.sebi.gov.in
2. SEBI (Settlement Proceedings) Regulations, 2018
3. Securities and Exchange Board of India Act, 1992
4. Securities Contracts (Regulation) Act, 1956
5. Depositories Act, 1996
Note: Readers are advised to go through the original content of the Act/regulations/given references.
Author Bio
