The number of cases being settled in the capital market through consent settlement mechanism seem to have come down significantly, with regulator SEBI agreeing to settle only 36 such cases last fiscal.
The Securities and Exchange Board of India collected about Rs. 4.15 crore as charges and fees through the consent settlement in 36 cases during the 2013-14 fiscal.
This marks a significant decline from Rs. 12.62 crore collected by the capital markets watchdog through consent settlement in as many as 52 cases during the preceding financial year 2012-13, shows an analysis of such cases.
The decline in settlement cases comes amid stricter norms imposed by SEBI, which has expanded the list of violations that can’t be settled through this mechanism.
As per the new regulations, entities charged with serious offences like illegal money pooling, insider trading and fraudulent trades have been excluded from the settlement process. These norms were notified with retrospective effect from April 20, 2007 — the day when SEBI’s existing consent settlement system was introduced.
The market regulator had introduced the consent mechanism to cut down on its costs, time and efforts in taking up the enforcement actions.
Under the mechanism, entities facing proceedings from SEBI, pay settlement charges, as also legal and administrative expenses, without admission or denial of guilt.
In the recent months, SEBI has mostly approved consent settlement in cases related to alleged violation of disclosure norms. Typically, the number of cases rejected by SEBI for any consent settlement is higher than the approved cases.
SEBI rejected 232 consent pleas for settlement of ongoing proceedings against the entities concerned under its ‘consent mechanism’ between May 25, 2012 and December 31, 2013, as per the latest data. The data for rejected cases prior to May 25, 2012 is not available.