The Securities and Exchange Board of India is set to put in place a new and detailed mechanism for its ‘consent’ procedure — an out-of-court-like settlement through which it settles cases of suspected irregularities by listed companies and various market entities.

It has decided to revise the existing consent procedure, after it found lack of uniformity and necessary details in the prevailing system, which is in place since 2007, a senior official said.

The new consent mechanism, which could be announced soon by the regulator, has been finalised after months of deliberations that began around the middle of 2011 and involved consultations within SEBI and with the government officials and outside experts, he added.

In the consent process, the entity facing a probe by SEBI is subjected to certain fees and restrictions without admission or denial of alleged irregularities and the regulator thereafter drops its charges and the investigations.

As per the existing consent norms, the market regulator can impose a penalty higher between Rs 25 crore and an amount equivalent to three times the profit allegedly made by the suspected entity through insider trading or other manipulative activity.

SEBI has decided to revise the process after an internal study found that different yardsticks might have been applied in different consent cases and there was no consistency or any clear-cut uniformity in the way such cases were being handled.

Besides, it has also come across cases being settled with entities from the same group on more than one occasion, although a consent order is broadly considered as a warning to the related party for not repeating similar offences.

Another point of contention is certain discretionary powers given to SEBI officials settling the probe.

The revised norms would also aim to remove the perceptions about consent orders being mostly subjective, not being adequately transparent in nature, and providing an escape route to the alleged offenders.

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