SEBI Settlement Scheme 2020
Securities Exchange Board of India (SEBI) vide Public notice dated 27th July, 2020 provide a one-time settlement opportunity to the entities that have executed trade reversals in the stock options segment of BSE during the period from April 1, 2014 to September 30, 2015, against whom any proceedings are pending. Onetime settlement period shall commence on August 01, 2020 and end on October 31,2020.
• Reason behind this Settlement Scheme
“It was observed that there were several entities who consistently made significant losses, whereas there were others who consistently made significant profit by executing reversal trades in stock options on the BSE,” the market regulator said in a circular.
The SEBI board has considered three objective parameters -- artificial volume, number of non-genuine trades and number of contracts resulting in the creation of artificial volume/ non-genuine trades to arrive at an Indicative Settlement Amount.
- Observations:
Sl. No. | Particular | No. of Entities |
1. | Total entities executed trades on BSE Stock Options Segment | 21,652 |
2. | entities involved in generation of artificial volume by executing non-genuine/reversal trades on the | 14,720 |
3. | SEBI has initiated adjudication proceedings against | 567 |
• Reference of Case Law
The Hon'ble SAT vide its Order dated October 14, 2019 in the matter of R S Ispat Ltd Vs SEBI, has inter alia directed as follows: "…We are adjourning this matter today, so that SEBI may consider holding a Lok Adalat or adopting any other alternative dispute resolution process with regard to the Illiquid Stock Options. Therefore SEBI has decided to come out with Settlement Scheme (“the Scheme")
About the SEBI Settlement Scheme – 2020
S.no. | Particulars | Remarks |
1. | Applicable Laws
| Regulation 26 of SEBI (Settlement Proceedings) |
2. | Purpose of the Scheme | to provide a onetime settlement opportunity to the entities that have executed trade reversals in the stock options segment of BSE against whom any proceedings are pending. |
3. | Period of default | April 1, 2014 to September 30, 2015 |
4. | Criteria for Indicative Settlement Amount | i. artificial volume, ii. number of non-genuine trades and iii. number of contracts resulting in creation of artificial volume/ non-genuine trades |
5. | Uniform consolidated Settlement factor | 0.55 in all cases wherein the entities had executed reversal trades, would be applicable while arriving at the Indicative Settlement Amounts. |
• FAQ's on SEBI Settlement Scheme 2020
1. What will be the Eligibility Criteria?
Answer: The entities who have executed trade reversals on the stock options segment of BSE during the period from April 1, 2014 to September 30, 2015 against whom any proceedings are pending are eligible to avail the one time settlement opportunity.
2. What will be the Validity of the Scheme?
Answer: The scheme shall commence on August 01, 2020 and end on October 31, 2020 (both days inclusive).
3. How to submit Settlement Application?
Answer: An entity who wish to submit a Settlement application can submit along with an application fee of Rs. 15,000 in case of individuals and Rs. 25,000 in case of body corporates in the specified format, available on the SEBI website and also on the BSE website.
4. What will be the Mode of Payment?
Remittance of settlement amount shall be done Via online platform as available on the website of SEBI
After the expiry of the Scheme, entities who do not avail the onetime settlement opportunity shall be liable for action as per section 15-I of the SEBI Act, 1992.
DISCLAIMER: THE ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF THE PREPARATION. IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.
THE AUTHOR – CS DEEPAK SETH (ASSOCIATE PARTNER HELPINGHANDS PROFESSIONALS LLP) AND CAN BE REACHED AT CONTACTHHPRO@GMAIL.COM
