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Come January, wrongdoers in the capital market who wish to ‘settle’ their cases with SEBI may have to shell out a steep fee for serious violations.
After the AR Dave Committee suggested broad-basing the settlement mechanism, SEBI is revisiting its formula to impose stiffer settlement fees.
Under the new formula, the fee will be based on the gravity of the offence and be more punitive, sources told BusinessLine . Currently, SEBI follows a bargaining system for settlement of cases, wherein an indicative amount is put out by the regulator and the parties are allowed to negotiate.
The new formula is likely to consider the amount of alleged gains that the entity involved may have made. It may also consider the wrongdoer’s net worth as well as stature — whether an individual or a corporate entity with larger resources.
Need for more
In 2007, SEBI had borrowed the concept of settlement from the US Securities and Exchange Commission. For the mechanism to gain currency, consent orders were made less detailed and the fee, too, was not stiff. But with SEBI now allowing settlement of even serious offences, there is a feeling among officials that there should also be a commensurate hike in the fees. Only those turning approvers in large fraud cases may be given a lenient treatment.
SEBI is likely to spell out the details of the case and give the rationale for the fee, the sources said. Under current norms, a wrongdoer can settle a case without denial or admission of guilt.
Recent settlement orders by SEBI, wherein it did not give any details of the case, nor the reasoning for the paltry fees, have raised eyebrows. For instance, the regulator settled an alleged insider trading case against Rakesh Jhunjhunwala for a mere ₹2.5 lakh. The Sun Pharma insider trading case, involving individuals and some promoters, was settled for ₹18 lakh.
Under SEBI Chairman Ajay Tyagi, both settlement of cases and fees collected have risen.
As many as 200 cases were settled for over ₹30 crore in FY18, against 103 cases for ₹13.5 crore in FY17 and 34 cases for ₹4.42 crore in FY16.
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