Suggesting sweeping reforms, a high-level Sebi committee today recommended that wilful defaulters and fugitive economic offenders cannot settle a case under settlement norms, as well as addition of a confidentiality clause in the process.
Suggesting sweeping reforms, a high-level Sebi committee today recommended that wilful defaulters and fugitive economic offenders cannot settle a case under settlement norms, as well as addition of a confidentiality clause in the process. Besides, it has recommended that proceedings relating to insider trading, front-running and misstatements in the IPO documents may be settled “depending on the facts and circumstances of each case”.
It further suggested that Sebi may not settle a proceeding in case the alleged default has market wide impact, caused losses to a large number of investors, or affected the integrity of the market. The panel, headed by retired judge A R Dave, also suggested for a provision for settlement with confidentiality under the settlement regulation as well as limitation period for filing a settlement application.
“The confidentiality also depends upon the nature of the assistance provided” by the applicant to the regulator. The current regulation do not have a provision for settlement with confidentiality. All settlement orders contain details of the applicant and are published on Sebi’s website.
The Securities and Exchange Board of India (Sebi) has sought comments from public till September 1 on the committee’s recommendation and final regulation will be put in place after taking into views of the stakeholders. As per the recommendation, Sebi will not consider an application if it is made after 60 days from the date of service of the notice to show cause or supplementary notice to show cause, whichever is served later.
In case, the application is filed after 60 days, the settlement amount will be increased by 25 per cent. “No such application shall be considered if the delay exceeds 120 days,” the committee has suggested. The panel has suggested that an application for settlement will be considered, if an earlier application with regard to the same alleged default had been rejected.
The committee has suggested that 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, or affected the integrity of the market”. “The board may not settle the specified proceedings 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,” it added.
The regulator can reject an application based on grounds like if any entity refuses to respond to the Sebi’s communications; does not submit or delays the submission of information and other document; does not remit the settlement amount within the specified period and does not appear before the internal committee on more than one occasion.
An application for settlement with confidentiality will be considered if agree to provide substantial assistance in the investigation, inspection, inquiry or audit, initiated or ongoing, against any other person in respect of a violation of securities laws and fulfil the conditions like “cease to participate in the violation of securities laws from the time of the disclosure of information, the panel suggested.
“If the assistance is in nature of a clue or information, such as indicating the relevant bank account details, phone numbers or any other information which can be independently proven the information pertaining to the applicant will not be revealed either to the public or during the relevant proceedings to the accomplices who are charged by the Board,” it added.