Sebi turned down 40 settlement pleas in 2014

The Securities and Exchange Board of India (Sebi) rejected at least 40 applications by various entities for settlement of ongoing cases in 2014, while almost a similar number of pleas passed muster with the regulator during the year.

Along with greater powers given to Sebi last year, norms for settlement of cases also went through significant changes last year and such procedures have now been given legal sanctity with amendments to the Sebi Act and other laws.

As per latest data, Sebi rejected 40 applications for settlement of ongoing proceedings against concerned entities under its ‘consent mechanism’ till November 17 in 2014.

Figures for the remaining period of the year are yet to be made public. In comparison, Sebi had rejected a total of 84 settlement pleas in the entire 2013. At the same time, Sebi agreed to settle 41 cases under consent settlement and collected about Rs 3.58 crore as settlement fees during 2014. In comparison, Sebi had approved as many as 46 cases for settlement and garnered an amount of Rs 9.75 crore as fees in 2013.

Under the consent mechanism, the entities facing Sebi proceedings can seek settlement of the case after payment of certain charges, along with legal and administrative fees, without admission or denial of guilt.

The mechanism was put in place since the fiscal year 2007-08, but Sebi overhauled its consent regulations in May 2012 by making it tougher for cases of serious violations to be settled through this route. The rules went through further changes in 2014.

In January 2014, Sebi had issued the final norms governing consent settlement under which entities charged with serious offences like illegal money pooling, insider trading and fraudulent trades will not be able to settle these cases with the capital market watchdog.

Further, the new rules governing consent settlement have been notified with retrospective effect from April 20, 2007 -- the day when Sebi had first brought in the mechanism.

Since January, 2013, Sebi has been making public the names of the rejected applications. Till December 31, 2012, the regulator had rejected 149 consent applications, including that of 16 entities related to Reliance Industries. Sebi had introduced the consent system to cut down on its costs, time and efforts in taking up the enforcement actions.

Till end of fiscal 2013-14, Sebi has collected about Rs 107.66 crore through settlement and compounding proceedings of nearly 400 cases. 

Sebi norms for settlement also do not apply for defaults relating to insider trading, front running, failure to make an open offer, redress investor grievances and respond to the regulator’s summons were excluded from the consent process.