SEBI notified stricter Settlement System for serious offences

SEBI notified a stricter set of settlement norms that entities charged with serious offences will not be able to settle these cases any more.

Jan 10, 2014 16:50 IST
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SEBI (Securities and Exchange Board of India) on 9 January 2014 launched (Settlement of Administrative and Civil Proceedings) Regulations, 2014 that provides guiding factors for dealing with settlement processes. As per the new notifications the serious offences such as illegal money pooling, insider trading and fraudulent trades are excluded from the scope of settlement.

The set of regulations have been notified with retrospective effect from 20 April 2007, the day when the existing consent settlement system was introduced by SEBI.

Under the new norms, SEBI has expanded the list of violations which cannot be settled. It also provides for the involved entity to file settlement plea within 60 days of the show cause notice served to them by SEBI. It has also cleared that the charges and related costs would not be considered upon the payment of settlement also in the cases in which the applicant has already been a party to two earlier settlements.

Any case pending before the court or a tribunal would not be settled under the new norms. The new norms have also mentioned the minimum amount to be paid by entities, which will vary as per the charges against them. These charges will be highest for the promoters.

The norms has also defined the role of the internal committee and high powered advisory committee in order to impart transparency in the process. It has provided for the terms of settlement in monetary as well as non-monetary terms or both. The terms of settlement would include the payment of settlement amount and other related costs, closure of business, voluntary suspension of registration and other appropriate directions, as per the new norms.

The amount of settlement will be credited in the Consolidated Fund of India and the legal cost will be included in the general fund of SEBI. The illegal gains (if any) will be credited in SEBI’s Investor Protection and Education Fund.

Consolidated Fund of India

In the Constitution of India it is mentioned under Article 266(1) that Non-Tax Revenues will be credited into the Consolidated Fund of India. Apart from this also all revenues of the Government by ways of taxes like Income Tax, Customs, Central Excise and others will also be credited in the Consolidated Fund only. Similarly, all loans raised by the Government by issue of Public notifications, treasury bills (internal debt) and loans obtained from foreign governments and international institutions (external debt) are credited into this fund. All expenditure of the government is incurred from this fund and no amount can be withdrawn from the Fund without authorization from the Parliament.

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