SEBI tightens consent order norms

The Securities and Exchange Board of India (SEBI) has tightened its procedures and decided not to pass consent orders in case of defaults, including insider trading, front running and failure to make an open offer.

Modifying its April 2007 circular, which provides the framework for passing of consent orders and for considering requests for composition of offences, SEBI has said it will not initiate the consent process in case of very serious offences. These also include failure to redress investor grievances and failure to respond to summons issued by the market regulator.

''The defaults falling in the category of fraudulent and unfair trade practices, which in the opinion of SEBI are very serious and/or have caused substantial losses to the investors, shall also not be consented,'' SEBI said in a release.

No consent application will be considered if any violation is committed within a period of two years from the date of any consent order, it said. In respect of proceedings pending before the regulator, no consent application would be considered if filed after 60 days from the date of the service of the show cause notice, SEBI stated.

The market regulator has also stipulated four broad parameters for determining the consent terms. A minimum benchmark amount will be set for each category of default attributable to the default/violation for which the show cause notice is issued or may be issued.

Weightage will also be given to the stage of the proceeding, nature of the default/violation, gravity of the default/violation, volume traded, price impact, net worth, profits made, nature of disclosure not made and its impact.

SEBI said that the consent terms might also include other directives such as disgorgement of ill-gotten profits, if considered necessary.

A high-powered advisory committee - to be headed by a retired high court judge - or a panel of whole-time members of the regulator can enhance the settlement amount in serious cases, reduce the settlement amount if it is disproportionately higher, or even refuse to consider the case under the consent process, declared SEBI.

Once a consent application is rejected, it will not be considered again by SEBI at any stage later. The regulator will also dispose of the consent application expeditiously, preferably within a period of six months from the date of its registration, SEBI added.