Securities And Exchange Board Of India (Settlement Proceedings) Regulations, 2018

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The Securities and Exchange Board of India (SEBI) recently issued a Notification regarding the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018, which provide for the terms of settlement and the procedure of settlement and matters connected therewith or incidental thereto.

As per the Notification, in exercise of the powers conferred by Section 15JB of the Securities and Exchange Board of India Act, 1992; Section 23JA of the Securities Contracts (Regulation) Act, 1956; and Section 19-IA of the Depositories Act, 1996 read with Section 30 of the Securities and Exchange Board of India Act, 1992; Section 31 of the Securities Contracts (Regulation) Act, 1956; and Section 25 of the Depositories Act, 1996, SEBI has made the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 to provide for the terms of settlement and the procedure of settlement and matters connected therewith or incidental thereto.

Notably, these Regulations shall come into force on January 1, 2019.

The Notification includes:

APPLICATION FOR SETTLEMENT

Application

(1) A person against whom any specified proceedings have been initiated and are pending or may be initiated, may make an application to the Board in the Form specified in Part-A of the Schedule-I.

(2) The application made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Part-B of Schedule I and the undertakings and waivers as specified in Part-C of Schedule-I:

Provided that the rejection or withdrawal of the application shall not affect the continued validity of the undertakings and waivers given in respect of limitation or laches in respect of the initiation or continuation or restoration of any legal proceeding and the waivers given under sub-paras (d), (e), (f) and (g) of para 12 of the undertaking and waivers as provided in Part-C of the Schedule-I and subject to such undertakings and waivers, the Board or the applicant, shall be free to initiate or pursue such proceedings as may be appropriate in accordance with law.

(3) The applicant shall make full and true disclosures in the application in respect of the alleged default(s):

Provided that the facts established against the applicant or admitted in any ongoing or concluded proceedings in India or outside India, with respect to the same cause of action, under any law, shall be deemed to be admitted by the applicant in respect of the proceedings proposed to be settled.

(4) The applicant shall make one application for settlement of all the proceedings that have been initiated or may be initiated in respect of the same cause of action.

(5) An application that is not complete in all respects or does not conform to the requirements of these regulations shall be returned to the applicant.

(6) The applicant whose application has been returned under sub- regulation (5) may, within fifteen days from the date of communication from the Board, submit the complete and revised application that conforms to the requirements of these regulations:

Provided that no further opportunity shall be given to the applicant to make an application in respect of the alleged default at the same stage of the proceedings, as indicated in Table I in Schedule-II.

(7) Where the applicant is an association or a firm or a body corporate or a limited liability partnership, the application and undertakings and waivers shall be executed by the person in charge of, and responsible for the conduct of the business of such firm or association or body corporate and the same shall bind the firm or association, the body corporate and any officer who is in default.

(8) An application for settlement of defaults related to disclosures, shall to the extent possible, be made after making the required disclosure.

Limitation

(1) An application in respect of any specified proceeding pending before the Board shall not be considered if it is made after sixty days from the date of service of the notice to show cause or supplementary notice(s) to show cause, whichever is later.

(2) Notwithstanding anything contained in sub-regulation (1), the Board may consider the application, if satisfied that there was sufficient cause for not filing it within the specified period and it is accompanied with non-refundable fees as specified in Part-B of the Schedule-I:

Provided that, where the application is filed after sixty calendar days from the expiry of the period specified in sub-regulation (1), the settlement amount determined in accordance with Schedule-II of these regulations shall be increased by twenty five percent:

Provided further that, no such delayed application shall be considered if the application is filed after one hundred and twenty calendar days from the expiry of the period specified in sub-regulation (1) or after the first hearing, whichever is earlier.

(3) The provisions of this regulation shall not apply in the case of proceedings pending before the Tribunal or any court.

The Notification also provides details on:

• SCOPE OF SETTLEMENT - Scope of settlement proceedings, Rejection of application, Withdrawal of application, Effect of pending application on specified proceedings

• TERMS OF SETTLEMENT - Settlement terms, Factors to be considered to arrive at the settlement terms

• COMMITTEES - High Powered Advisory Committee, Internal committee(s)

• PROCEDURE OF SETTLEMENT - Proceedings before the Internal Committee, Proceedings before the High Powered Advisory Committee, Action on the recommendation of High Powered Advisory Committee

• SUMMARY SETTLEMENT PROCEDURE

• SETTLEMENT NOTICE

• SETTLEMENT WITH CONFIDENTIALITY

• SETTLEMENT ORDERS - Settlement of proceedings before the Adjudicating Officer and the Board, Settlement of the proceedings pending before the Tribunal or any court, Service and publication of settlement order, Settlement Schemes, Effect of settlement order on third party rights or other proceedings, Revocation of the settlement order

• MISCELLANEOUS - Confidentiality of information, Power to remove difficulties, Irregularity in procedure, Relevance of these regulations in specified proceedings, Procedure for composition, Repeal and savings

• SCHEDULE-I: FORM - Application for settlement (To be filed only after conclusion of investigation, inspection, inquiry or audit, as the case may be)

• SCHEDULE-II: Guidelines for arriving at settlement terms, indicative amount and the settlement amount, proceeding conversion factor, regulatory action factor - value for all orders and regulatory directions, applicable base values and factors, applicable base amount, repetitive nature of default

To view the entire Official Notification in detail, please view the file attached herein.

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