SEBI allows compounding of offences to settle disputes
21 Apr 2007
Mumbai: The Securities and Exchange Board of India (SEBI) has announced a new system for settling disputes under which it can slap penalties on defaulters without taking recourse to long drawn litigation in courts.
Violators or defaulters of securities laws can now approach the SEBI''s high-power committee – which will be headed by a retired high court judge – for compounding of offences to obtain what is called a ''consent order''.
The committee, while granting a `consent order'' sought by a defaulter, will consider factors such as the object of the violated law as also the interest of the investors and the securities market.
It will also take into consideration factors such as gravity of charge, nature of violation – whether the violation was intentional – party''s conduct during investigation, history of non-compliance, benefits accruing for delaying compliance, while approving the consent order, said the SEBI guidelines.
The consent orders will detail remedial action and payment of consent penalties, in cases where the proceedings are pending or are likely to be instituted.
While the order will provide flexibility of enforcement actions to impose adequate sanction and create sufficient deterrence, the guidelines also allow the committee to revise the terms of consent orders proposed by defaulters if they are found inadequate in light of the gravity of offences committed.
The changes are inspired by US market regulator, the Securities and Exchange Commission, which "settles a substantial number (over 90 per cent) of administrative/civil cases by consent orders, the Sebi said in a circular.
