Millennium Post

Sebi panel for confidentiality clause in settlement mechanism

New Delhi: A high-level Sebi panel has prosed a confidentiality clause in the settlement mechanism, wherein identity of the applicant will not be disclosed, in order to garner information of defaults as well as possible violations from defaulters in the securities.

Currently, the settlement regulation does not have a provision for settlement with confidentiality and all settlement orders contain details of the applicant and are published on Sebi website.

"There is no explicit provisions for an applicant to voluntarily provide information to the (Sebi) board relating to the fraudulent and unfair trade practices and other serious defaults that would assist the board in dealing with any inquiry, investigation, inspection, and audit," the panel said in its report submitted to the regulator.

The panel headed by retired judge A R Dave has suggested for a provision for settlement with confidentiality under the settlement norm.

It has recommended that even the settlement order in cases of settlement with confidentiality will need to be published. However, the identity of the applicant may not be disclosed.

The settlement mechanism enables entities to settle charges against them without admission or denial of guilt on payment of fee. The Securities and Exchange Board of India (Sebi) has sought comments from public till September 1 on the committee's suggestions and final regulation will be put in place after taking into views of the stakeholders.

It also suggested not settling the case with wilful defaulters and fugitive economic offenders under settlement norms.

Besides, it has recommended that proceedings relating to insider trading, front-running and misstatements in the IPO documents may be settled "depending on the facts and circumstances of each case".

An applicant seeking the benefit of confidentiality in settlement with Sebi will have to cease to participate in the violation of securities laws from the time of the disclosure of information.

Moreover, the applicant would need to provide complete and true disclosure of information; cooperate full throughout the investigation; and will not conceal and manipulate documents in any manner that may contribute to the establishment of the alleged violation, the panel suggested.

Noting confidentiality is multi-faceted and depends on the nature of assistance provided to Sebi, the panel suggested that there will not be any public disclosure unless such disclosure is made by the applicant himself or are agreed to by the applicant in writing.

Such applications and information pertaining to applicants and the assistance provided by them to Sebi are already protected from disclosure.

"Further, the confidentiality also depends upon the nature of the assistance provided to the Board.

"If the assistance is in nature of a clue or information, such as indicating the relevant bank account details, phone numbers or any other information which can be independently proven, the information pertaining to the applicant will not be revealed either to the public or during the relevant proceedings to the accomplices who are charged by the Board," the panel noted.

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