Regulation 5 - Scope of settlement proceedings - Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations, 2014

CHAPTER III SCOPE OF SETTLEMENT Scope of settlement proceedings. 5. (1) No application for settlement of any specified proceedings shall be considered, if: (a) the alleged default was committed within a period of twenty four calendar months from the date of the last settlement order where the applicant was a party; (b) an earlier application with regard to the same alleged default had been rejected: [Provided that such an application may be considered in exceptional circumstances, such as the lapse of time since the commission of the alleged default, the weight of evidence against the applicant, etc and subject to the payment of such additional fees and/or interest on the settlement amount from the date of rejection of the earlier application till the date of payment of the settlement amount, as may be recommended by the high powered advisory committee.] 1 (c) the applicant has been party to two settlement orders during the period of thirty six calendar months, prior to the date of the application; (d) the audit or investigation or inspection, if any, in respect of any alleged default, is not complete. (2) A specified proceeding, shall not be settled, if it involves any of the following defaults, namely,- (a) defaults involving insider trading and communication of unpublished price sensitive information in contravention of the provisions of the Act and the regulations made thereunder; (b) fraudulent and unfair trade practices including front running, which in the opinion of the Board are serious and have a market wide impact or have caused substantial losses to or affect the rights of investors in securities, especially retail investors and small shareholders: Provided that where the applicant has made or intends to make good the losses due to the investors, his application may be considered. 2 [Provided further that the defaults under this clause shall be considered in accordance with these regulations and also the guidelines specified in Schedule-II.] Explanation.- For the purpose of this clause, the expression ' front running' means usage of non-public information to directly or indirectly, buy or sell securities or enter into options or futures contracts, in advance of a substantial order, on an impending transaction, in the same or related securities or futures or options contracts, in anticipation that when the information becomes public; the price of such securities or contracts may change; (c) failure to make an open offer in accordance with the provisions of the Act and the regulations made thereunder, except where the applicant agrees to make the open offer or where the Board is of the opinion that the making of the open offer would not be beneficial to the shareholders or is infructuous; (d) defaults or manipulative practices by mutual funds, alternative investment funds, collective investment schemes and their sponsors or asset management companies, collective investment management company, managers, trustees that result in substantial losses to investors, except in cases where the applicant has compensated the investors for the losses, to the satisfaction of the Board; (e) failure to redress investor grievances to the satisfaction of the Board, except where the alleged default is with regard to delayed redressal; (f) failure, by issuers of securities or entities who invite investment, to make material disclosures in offer documents as required under the relevant regulations framed by the Board; (g) raising of monies by issuance of securities or pooling of funds, in violation of securities laws where the remedy is refund of such monies; (h) non-compliance of notices and summons issued by the Board or summons issued by the adjudicating officer; (i) non-compliance of any order or direction passed under the securities laws. (3) Notwithstanding anything contained in this regulation, where the applicant makes out adequate grounds in his application, the settlement of proceedings in respect of the defaults referred to in sub-regulation (2) may be considered in the interest of the investors and the development and regulation of securities market: Provided that the reasons for settlement of such proceeding shall be recorded in writing. (4) Nothing contained in these regulations shall be construed to preclude the panel of whole time members to reject any application in respect of specified proceedings involving the defaults referred to in clauses (a), (g), (h) and (i) of sub-regulation (2) without examination by the internal committee or the high powered advisory committee. ******** 1 Inserted by the Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) (Amendment) Regulations,2017 w.e.f. 27.02.2017. 2 Inserted by the SEBI (Settlement of Administrative and Civil Proceedings)(Amendment) Regulations, 2016, w.e.f. 29.8.2016.