The Securities and Exchange Board of India (SEBI) has made a major change in the settlement process for those violating the rules in the stock market. Under the new rules, cases with settlement amount up to ₹ 10 lakh can now be settled faster. Along with this, the formula for determining the settlement amount has also been changed. The new rules aim to make the process simple, transparent and predictable, so that there are no unnecessary delays in minor cases. However, this does not mean that rule breakers will be let off with a sigh of relief. The settlement may also be subject to necessary regulatory requirements and recovery of ill-gotten gains.
According to SEBI’s October 6 notification, a base amount will be set to decide the amount in the new settlement framework. This amount will be linked to the minimum penalty prescribed under securities laws for the relevant violation. The amount will then be revised taking into account the status of the case, prior regulatory action taken, seriousness of the violation, aggravating or mitigating factors and legal expenses. This will help in making the process of determining the settlement amount in individual cases more clear and predictable.
Wrong earnings and investors’ losses will be calculated separately
An important change in the new rules is that ill-gotten gains, amounts saved from losses or losses suffered by investors will not be included in the base amount. If it is possible to calculate these amounts, they will be recovered separately. Earlier, inclusion of such amount in the calculation of settlement could have led to double counting. In the new framework, settlement amount, refund of wrongful earnings and corrective and regulatory terms have been kept separately. The arrangements previously known as non-monetary terms are now called Remedial and Regulatory Terms (RRT).
Fast-track facility in cases up to ₹10 lakh
SEBI has launched two routes for fast-track settlement. First, based on the limit of amount and second, based on the type of violation. Under the amount-based arrangement, cases with settlement amount up to ₹10 lakh will be referred directly from the internal committee to the panel of whole-time members. In the violation based system, SEBI will give notice to the concerned entity and give an opportunity to settle the matter by paying the prescribed amount. After payment the panel of members will issue settlement order.
Rules may also apply to cases involving financial irregularities
Under the new rules, settlement of cases related to giving wrong information in financial statements or misuse of funds will also be possible, provided necessary corrective steps are taken. These may include making proper disclosures and recovering funds that were wrongfully removed.
Input- PTI
Also read- Settlement of 5 companies of Adani Group with SEBI, settlement for ₹ 1.51 crore in the case related to Hindenburg Report.
SK Sharma is a content writer who writes on news, entertainment, and lifestyle topics. She has over four years of experience and is known for conveying information in simple and clear language.
