The Securities and Exchange Board of India has reiterated that only the May 2012 consent circular will apply, even for applications filed prior to the circular being issued.
SEBI’s stand is in response to industry bodies such as Assocham and CII representing to the Finance Ministry asking for a rethink of the modified consent framework. The regulator’s view will be a setback to the companies that have challenged its stance.
SEBI, according to industry sources, has communicated its decision to the industry bodies.
The regulator has also affirmed that it has not violated any rule of natural justice while framing the May 2012 consent circular. All pending applications will come under the new circular, except those cases where consent terms have been received for placing before the high-powered advisory committee, which shall be dealt under the April 2007 regime.
Preserves discretion
The new consent guidelines preserve the discretion of the high-powered advisory committee or panel of whole-time members to consider settling certain defaults that cannot be settled by consent under the modified framework.
Consent settlement is one of the three forms of amicable settlement used by authorities for a variety of enforcement actions. The other two are plea bargaining and compounding.
The May 2012 circular had said certain defaults such as insider trading, serious fraud, unfair trade practice, failure to make open offer and front running cannot be ordinarily settled.
“When the new circular explicitly provides that certain defaults cannot be settled, how can there be discretion in those cases,” asked an industry observer.
Assocham had said it would be in order in terms of natural justice to allow consent applications filed under the April 2007 circular to be disposed of in terms of that circular.
SEBI’s stance that no rule of natural justice has been violated is significant as the matter of modified consent settlement framework has been challenged before the Securities Appellate Tribunal.
Reliance Industries Ltd had filed an appeal before SAT against the SEBI move to reject its plea for consent settlement. RIL had sought to settle a probe by the capital market regulator into the alleged violation of insider trading norms in sale of shares of its erstwhile subsidiary Reliance Petroleum, in 2007.
The company had challenged SEBI’s move to reject its consent application.
It had also questioned the regulator’s decision to bring certain cases already filed with it under the April 2007 circular into the new modified framework of May 2012.