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SEBI proposes changes to settlement amounts and disgorgement interest
The regulator says the revamp could cut average settlement proposals from about eight times final penalties to about four.
India’s markets regulator, the Securities and Exchange Board of India, has proposed a revamp of its settlement framework aimed at making the process simpler, more predictable, and easier for entities to use, according to LiveMint Markets.
The proposal would change how settlement amounts are calculated, linking a base amount to the minimum penalty under relevant securities laws and applying a multiplier based on the applicant. It would also factor in the stage of proceedings, past regulatory action, type of violation, and aggravating or mitigating factors, while excluding wrongful gains or investor losses from the base-amount calculation because those would be disgorged separately.
SEBI also outlined a clearer interest structure for disgorgement. If no final order has been passed, interest would be charged at 9.0% per year from the transaction date until the settlement application is filed, while interest would be 9.0% until a final order and 12.0% thereafter until the application is filed.
LiveMint Markets said SEBI’s study of settlement cases where outcomes were not reached found earlier settlement amounts were, on average, about eight times the final penalties, and the regulator expects the new framework could reduce that to about four. The regulator’s stated goal is to avoid making settlements so costly that entities choose not to use the process.