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Sebi to overhaul settlement rules to cut penalties and speed enforcement
Sebi said the settlement amount to final penalty gap would narrow to about four times, down from roughly eight times in rejected or withdrawn cases.
India's markets regulator Sebi is proposing to overhaul its settlement framework, aiming to reduce settlement amounts and speed up enforcement by changing how payments are calculated and by allowing cases to be resolved earlier, LiveMint Markets reported, citing Bloomberg.
Sebi found that in cases where settlement applications were rejected or withdrawn and the matter later resulted in a penalty, the settlement amount averaged about eight times the final penalty. Under the proposed framework, the regulator expects that gap to narrow to about four times, using a new formula based on a base amount adjusted for factors including the stage of proceedings, regulatory history, aggravating circumstances, and mitigating factors.
The proposal would expand the range of mitigating factors and adjust how wrongful gains are treated, with gains continuing to be disgorged but excluded from the base-amount calculation to avoid counting them twice. Sebi also wants to make it easier for applicants to return to settlement, including allowing a later re-application in certain circumstances if the reason for rejection no longer exists, with an additional 20% settlement amount for filings after a show-cause notice.
On process changes, Sebi proposed a fast-track mechanism for settlement amounts up to ₹10 lakh, which would avoid referral to the High Powered Advisory Committee. The consultation paper also calls for settlement notices to be issued before initiating certain formal proceedings, extending the deadline for filing after a show-cause notice from 60 to 90 days, with possible extensions where delays are beyond the applicant's control.