Sebi plans to overhaul consent settlement rules, reduce timeline by a third

At present, a settlement application can be filed in 60 days of receipt of show-cause; another 120 days given to noticee paying 25% over settlement amount, which Sebi wants to do away with

Market regulator Sebi has proposed to overhaul the framework governing consent settlements with the aim of making the system more efficient. The new framework, proposed through a discussion paper, aims to cut down the timeline and rationalise the fee structure.

Sebi has proposed to cut the timeline currently available for filing settlement applications from 180 days to just 60 days.

At present, a settlement application can be filed within 60 days of the date receipt of the show-cause notice. However, an additional 120 days can be availed by the noticee provided they pay 25 per cent extra over the settlement amount. Sebi has proposed to do away with the additional time provision.

“Such delays not only do not serve the purpose of the enforcement process but also impede the expeditious disposal of the enforcement proceedings. It is therefore proposed that the additional time period of 120 days with payment of additional settlement amount may be done away with,” the regulator has said.

Further, the time given to submit revised settlement terms are also proposed to be cut to just 15 days. The current provision allows 10 days plus additional 20 days.

“The extended period of 20 working days…is often misused by certain entities as a procrastinating tactic and delay the conclusion of the enforcement process,” Sebi has said.

Also, Sebi has proposed to provide only 30 days for remitting the settlement amount. Currently, the regulator allows 60 days extended period but levies simple interest of 6 per cent per annum for the delay

“Additional time for payment of settlement amount with interest is hardly used by the applicant. Thus, a period of 30 days from the time of issuance of the notice of demand is more than sufficient for remittance of the settlement amount,” Sebi has said.

Further, the regulator has proposed to reduce the so-called proceeding conversion factor (PCF) value to encourage filing of settlement applications during the early stages of the proceedings.

Under the consent settlement, an alleged wrongdoer can settle a pending matter with Sebi without admission or denial of guilt by paying a settlement fee. This system has proved to be an effective alternative to the enforcement process as it helps save time and resources of both Sebi as well as the corporates.

The settlement process was codified through the Sebi Settlement of Administrative and Civil Proceedings Regulations, which were notified in January 2014.

Sebi has invited public feedback on the discussion paper on settlement regulations until October 14.