SEBI passes Settlement Order in IL&FS Financial Services Ltd Case

SEBI passes Settlement Order in IL&FS Financial Services Ltd Case

The Securities Exchange Board of India (SEBI) has passed a settlement order in IL&FS Financial Services Ltd case pertaining to alleged non-submission of 'fit and proper' declaration to the exchange after paying Rs. 13.65 lakh settlement order.

The IL&FS Financial Services Ltd proposed to settle the case the case, without admitting or denying the findings of fact and conclusions of law, under the pending adjudication proceedings initiated against it for alleged violation of Regulation 19(7) of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (hereinafter also referred as “SECC Regulations”).

In 2020, Metropolitan Stock Exchange of India Limited (hereinafter referred as “MSEI”) had informed SEBI that in accordance with Regulation 19(1) of SECC Regulations, it had submitted Fit and Proper Declarations to SEBI. It also stated that declarations were received from all shareholders holding more than 2% shares of the paid-up equity share capital of MSEI, except IL&FS, which has holding of 2.48% equity shares of MSEI. MSEI, further added that in this regard it has issued several reminders to IL&FS, in the past several months, however IL&FS has not responded.

Regulation 19(7) of the SECC Regulations, requires that any person holding more than 2% of paid-up equity shares of a recognized stock exchange shall file a declaration to such exchange that he complies with fit and proper criteria. By failing to file declaration to MSEI as stated above, IL&FS was allegedly in violation of provision of Regulation 19(7) of SECC Regulations

Pending adjudication proceedings initiated through a show cause notice, IL&Fs filed settlement application with SEBI in June 2022 to settle the case.

Thereafter, SEBI recommended the amount of Rs. 13,65,000, as the Settlement Amount, provided that the IL&Fs makes the requisite declaration of ‘Fit and Proper’ as required under the aforesaid provisions, to the satisfaction of MSEI.

Thereafter, on 6 September, 2020 and 15 November, 2022, the IL&Fs submitted the Fit and Proper declarations for financial years 2022, 2021, 2020 and 2019 to MSEI.

The Internal Committee considered the submissions of the Applicant and noted that the revised settlement terms (RST) proposed by the IL&Fs were in line with the amount formulated as per the Settlement Regulations and recommended the case for settlement to High Powered Advisory Committee (hereinafter be referred to as, the “HPAC”). Thereafter, the Settlement Application was placed before the HPAC for its consideration.

The HPAC in its meeting held on 14 December, 2022, considering the facts and circumstances in the matter, agreed with the recommendations of the Internal Committee, and recommended that the request of the IL&FS for settlement may be accepted.

The recommendations of the HPAC were placed before the panel of Whole Time Members of SEBI (WTMs) for consideration and were approved by the Panel of the WTMs of SEBI on 18 January, 2023.

The SEBI in its order observed, “in view of the acceptance of the settlement and the receipt of settlement amount as above by SEBI, the instant Adjudication Proceedings initiated against IL&FS Financial Services Ltd. are hereby disposed of in terms of Section 15JB of the SEBI Act read with Regulation 23(1) of Settlement Regulations.”

Accordingly, it settled the case with SEBI.