Sebi Settlement Rules Explained: New penalty formula, faster process, revised interest rates - Key changes you need to know
Sebi proposes a new settlement framework that removes extra charges, fast‑tracks low‑value cases, and links penalties to minimum fines for simpler, more predictable settlements.Summary
Sebi has outlined a comprehensive overhaul of its settlement framework to make enforcement settlements simpler, faster and more predictable. The key changes include scrapping the additional 20 per cent settlement charge that applied to multiple proceedings, introducing a fast‑track mechanism for cases involving amounts up to Rs 10 lakh that bypasses the High Powered Advisory Committee, and streamlining approval so that cases move directly from the Internal Committee to a panel of Whole Time Members. The existing summary settlement mechanism for specified violations will remain in place under the new framework, and settlement orders will be issued after payment by the competent authority or the panel of Whole Time Members if no proceedings are pending.
A new method for calculating settlement amounts will link them to the minimum penalty prescribed under securities laws, with different multipliers for each applicant category. Wrongful gains and investor losses will be excluded from the base settlement amount and recovered separately through disgorgement. The regulator has also clarified how defaults are counted—aggregating defaults, treating multiple failures from a single event as one default, and eliminating separate calculations for each provision. The maximum number of mitigating factors that can be considered will increase from three to five, allowing for changes in control or management and independent director status.
Interest on disgorgement will be recalculated: 9 per cent per annum from the transaction date until the settlement application is filed, rising to 12 per cent after a final order is issued, with no interest on interest. For cases with many transactions, a weighted annual average will be used. Sebi has extended the 60‑day deadline for filing settlement applications to accommodate corporates and overseas entities, and it has invited public comments on the proposals until September 4.
(Source：Et Now)