The Securities and Exchange Board of India (SEBI) has proposed changes to how it settles enforcement proceedings for alleged securities-law violations. The mechanism allows eligible cases involving companies, directors, market intermediaries and other applicants to be resolved on agreed monetary and corrective terms. The consultation, issued on 14 August, reviews the Settlement Proceedings Regulations, 2018.
The paper proposes a simpler method of calculating the settlement payment. Its “base amount”, the starting figure for that payment, would generally be twice the minimum statutory penalty for the alleged violation for an independent director, compared with 3.5 times for an executive director. The final amount would also reflect the stage of proceedings, regulatory history and circumstances of the violation. An independent director alleged to have benefited from or actively participated in fraud would be treated on the executive-director basis.
The paper also proposes limiting settlement obligations to the applicant, addressing concerns about imposing terms on other directors or officers. For financial misstatement and diversion-of-funds cases, it proposes disclosures and restoration of diverted money as settlement conditions. Comments closed on 4 September.
Source: SEBI consultation paper and draft regulations
