Sebi notifies new settlement rule; unveils formula, fast-track route. Check details
The Securities and Exchange Board of India (SEBI) has rolled out fresh regulations that modify how settlement amounts for securities violations are calculated. This revamped formula curtails the double counting of unjust gains in settlement assess...
By ET Bureau |
IANS
Markets regulator Sebi has notified new regulations providing a revised formula for calculating settlement amounts and a fast-track route for cases involving settlement amounts of up to ₹10 lakh.
The new framework separately provides for disgorgement of wrongful gains, loss avoided or loss caused to investors, removing the existing double counting of such amounts while calculating settlement terms.
Under the new framework, settlement terms will comprise the settlement amount, disgorgement of wrongful gains, wherever applicable, and remedial and regulatory terms, earlier referred to as non-monetary terms, according to a notification dated October 6.
The new formula for calculating the settlement amount will be based on a base amount linked to the minimum penalty prescribed for the violation under securities laws. The base amount will be adjusted using factors relating to the stage of proceedings, regulatory action, gravity of the violation, aggravating factors, mitigating factors and legal costs.
Sebi said wrongful gains, loss avoided or loss caused to investors will not be included while determining the base amount. Such amounts, where quantified, will instead be disgorged separately. This removes the existing double counting of such amounts when computing settlement terms.
The regulator has also introduced a fast-track settlement route based on both monetary thresholds and the nature of violations, including certain disclosure-related violations. "Fast-track settlement shall be of two types -- violation-based fast-track settlement and monetary threshold-based fast-track settlement," Sebi said.
Under the monetary threshold-based route, cases where the settlement amount does not exceed ₹10 lakh will move directly from the internal committee to a panel of whole-time members.
For violation-based fast-track settlements, Sebi will issue a notice offering the entity an opportunity to settle by paying the amount specified in the notice.
The new framework separately provides for disgorgement of wrongful gains, loss avoided or loss caused to investors, removing the existing double counting of such amounts while calculating settlement terms.
Under the new framework, settlement terms will comprise the settlement amount, disgorgement of wrongful gains, wherever applicable, and remedial and regulatory terms, earlier referred to as non-monetary terms, according to a notification dated October 6.
The new formula for calculating the settlement amount will be based on a base amount linked to the minimum penalty prescribed for the violation under securities laws. The base amount will be adjusted using factors relating to the stage of proceedings, regulatory action, gravity of the violation, aggravating factors, mitigating factors and legal costs.
Sebi said wrongful gains, loss avoided or loss caused to investors will not be included while determining the base amount. Such amounts, where quantified, will instead be disgorged separately. This removes the existing double counting of such amounts when computing settlement terms.
The regulator has also introduced a fast-track settlement route based on both monetary thresholds and the nature of violations, including certain disclosure-related violations. "Fast-track settlement shall be of two types -- violation-based fast-track settlement and monetary threshold-based fast-track settlement," Sebi said.
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Under the monetary threshold-based route, cases where the settlement amount does not exceed ₹10 lakh will move directly from the internal committee to a panel of whole-time members.
For violation-based fast-track settlements, Sebi will issue a notice offering the entity an opportunity to settle by paying the amount specified in the notice.
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