The Supreme Court-appointed expert committee has pointed out SEBI’s poor show in settlement of cases. As per the committee, in the heightened initiation of enforcement by SEBI, while the number of settlements attempted has gone up in absolute terms, the percentage of settlement proposals has crashed to 4.79 per cent from 42.52 per cent in the previous year.

As per the committee, the data presented by SEBI with statistics on settlement, points to the fact that the approach to proceedings is still not robust and there is an unstated perception of reluctance to settle potential proceedings arising from causes of action identified.

“SEBI has formulated objective criteria in regulations governing settlement of proceedings and therefore there should be very little scope to not be objective about the terms of settlement,” the committee has said.

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HPAC recommendations

To effect settlements, SEBI has proposals of settlement filed by noticees vetted by an “internal committee” which puts up its recommendations to a “high-powered advisory committee‘‘ (HAPC).

The HPAC gives its recommendation which is dealt with by a panel of whole-time members of SEBI. The committee had sought data on settlement proceedings and it concluded that the information available at this stage did not lend itself to a high quality of empirical analysis.

Some trends are however visible. Data submitted by SEBI shows that for the years 2019-20, 2O20-21 and 2021-22, SEBI has not differed with the HPAC in a single case — a break-down of the recommendation being one of accepting a settlement or rejecting a settlement is not available. 

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Need for a coherent policy

Likewise, data from SEBI does not throw any light on the percentages of cases in which the internal committee recommends acceptance and rejection, and in how many of those, the HPAC takes a different view.

So also, data on cases disposed in a year includes disposal of cases pending from previous years. While this will not indicate the percentage clearance of cases, it points to cases remaining pending across years. A time-bound disposal must be embedded in the law and all of which needs a deeper empirical study, the committee has said.

“If SEBI desires to initiate enforcement in over 7,000 cases in a year, it must put in place a coherent policy on settlement of proceedings, whereby financial injury commensurate with the alleged violation may be inflicted on the party and yet precious resources need not be expended where a settlement is possible, achieving a remediation that subserves regulatory objectives. This is a universal principle for securities regulations worldwide and there need be no exception for India,” the committee has said. 

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