TMI BlogGUIDELINES FOR ARRIVING AT SETTLEMENT TERMSX X X X Extracts X X X X X X X X Extracts X X X X ..... entity shall be deemed to be the record of the new entity. Considerations such as change of name or management or ownership shall be irrelevant when determining the liability of the said entity. 5. Where an entity desires to obtain the benefit of a lower PCF, in relation to any alleged default it may, suo motto, before the receipt of any notice to show cause, intimate the Board of such default hereinafter referred to as intimation defaults and co-operate with SEBI in the investigation, inquiry, inspection or audit. It may thereafter file a settlement application, upon completion of the investigation, inspection, etc. The application shall be deemed to have been made Pre- issue of notice to show cause for the purpose of calculating the PCF. [6. The IA is to be calculated for each applicant. In a case where multiple applicants apply in respect of a default arising from the same cause of action, the IA will be calculated for each applicant, as per the applicable formula except in the following cases where the applicants may be considered to have joint and several liability,- (a) the acquirer and persons acting in concert (PAC) under the Takeover Regulations; (b) in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the rights of investors in securities, especially retail investors and small shareholders. (c) Thus, in order to fall in disqualification of clause (b), the default must be serious and it must fall in any or all of the categories mentioned in points (i), (ii) and (iii) above. Notwithstanding the same, where both these criteria are attracted, the application may be considered for settlement, if the applicant has made or intends to make good the losses to the investors in terms of the first proviso to clause (b), provided he undertakes in writing that,- 'for the limited purpose of settling the administrative and civil proceedings I/We admit the charge before the Securities and Exchange Board of India.' (d) While considering its 'seriousness', the default shall be seen in the context of its specific nature and the role played by the applicant. The charges against the applicant in the show cause notice or the investigation report or the report of the designated authority, as the case may be, may not be the only deciding factor in this regard. The weight and sufficiency of the evidence and the basis of the charge levelled against the applicant or the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which a proceeding under securities laws may be or has been initiated by the Board; it is determined separately for each category of default and in case of multiple defaults, the total sum thereof, determined in terms of these guidelines; [1. (a) Where the AO has already awarded penalty to the applicant, then B shall be equal to the amount calculated by these guidelines or the penalty awarded by the AO, whichever is higher; (b) In case more than one proceeding arising from the same cause of action has been initiated against the applicant, the IA shall be increased by 15%; (c) In cases where the WTM or DM has issued directions debarring or suspending the applicant, the RAF shall take into account the value of Y as per Table III.] 7 2. The amount which is finally recommended by the HPAC after taking into account the IA, any mitigating or aggravating factors etc; and approved by the Panel of Whole Time Members is the SA. 3. After payment of the SA, the settlement order along with other directives, if any, shall be passed accordingly. CHAPTER III PROCEEDING CONVERSION FACTOR The values assigned on the basis of the stage of the proceedings, as on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RY DIRECTIONS ISSUED TO THE APPLICANT X PER ORDER Exonerated cases i.e. cases where applicant was exonerated in an order or appeal or review 0 Settlement Order 0.01 ALL OTHER ORDERS (EXCEPT FOR WHICH THE APPLICATION IS FILED) Cease and desist order 0.02 Order of AO or WTM issued against other market participants 0.05 Order of AO, DM or WTM issued against intermediaries or listed companies 0.075 TABLE III- VALUE FOR ORDER OR DIRECTION PASSED OR ISSUED FOR WHICH THE APPLICATION IS FILED - Y PROCEEDING BEFORE DM PROCEEDING BEFORE WTM Y PER ORDER Warning issued 0.05 Suspension upto 1 week Debarment upto 6 calendar months 0.1 Suspension for 1 week or more, but less than 1 month Debarment for 6 calendar months or mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volume traded or price change, quantity traded in respect of the group, of which the applicant is a part of or of the applicant when he acts alone, as the case may be, can be calculated from findings brought out in the investigation report or notice to show cause or order, as the case may be. In case multiple trading periods are involved the highest change has to be considered. c. Time value of ill-gotten gains* 0.09 no. of calendar years from the date of commission of the default d. Reputation risk applicable in all cases All applicants - 0.25 *Factor c is applicable only in cases where the actual profit and/or loss avoided (approx) is determinable. While calculating the period, the fractions may be ignored. V = VALUE FOR THE HIGHEST % OF VOLUME TRADED IN ANY TRADING PERIOD DURING THE ENTIRE PERIOD OF DEFAULT In case of more than one scrip, the scrip with the highest volume traded is to be considered % VOLUME TRADED (ILLIQUID SCRIP) V % VOLUME TRADED (LIQUID SCRIP) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-exist, the sum thereof shall be taken into consideration for arriving at the total ill-gotten profit made by the applicant. 2. In cases of issue of fraudulent securities, fraudulent purchase of securities, including where funding is though circuitous route, etc., the profit made and/or loss avoided, shall be calculated after taking into account the market value of the securities on the date of purchase, allotment, issue, etc; whichever is relevant, in addition to the profit earned from subsequent sale thereof, if any. 3. In cases involving the siphoning of funds or cornering of securities in an issue, the applicant s profit made and/or loss avoided shall take into account the net proceeds or the value of the securities or the share thereof received by the applicant. 4. In cases involving an intermediary, the profit made and/or loss avoided shall take into account the gross fees earned by the applicant in respect of the default, by whatever name called and any proprietary trades, if any. 5. In cases where the purpose of the FUTP is to maintain the price, the profit made and/or loss avoided shall take into account any means by which the applicant has benefited includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1 crore Or 0.5% of the (highest) market value of its/his holdings in the company (including any convertible warrant or options) whichever is higher ₹ 25 lakh Or 0.5 % of the (highest) market value of its/his holdings in the company (including any convertible warrants or options) whichever is higher; ₹ 10 lakh Note: I. In case of pre-IPO related matters, the market value will be computed on the basis of the listing price. II. In the case of already listed companies, the value of holdings during the period of default shall be taken. d. Listed companies (to be borne by the promoter group or directors or KMPs or the company or both, as the case may be) (In case where the charge against a company is of funding its own issue or any other FUTP charge and the promoters or directors are also charged for the same default as the company, then only point d applies. In other cases, the higher of point c or d shall be borne by the promoters or directors, as the case may be) ₹ 10 lakh Or 0.1% of its (highest) entire market cap during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be determined for each applicant as recommended or decided by the IC or HPAC or Panel of WTMs on the basis of the facts and circumstances of each case * TO be calculated per scrip or product manipulated. In case the scrip is part of any index maintained by BSE Ltd or National Stock Exchange of India Ltd, the Base Amount shall be increased by 15%. In these guidelines the following persons shall be treated as name-lender : An applicant who allows his name to be used or whose name is used for opening a demat account or client account by another, who operates the same as his own account. It includes an account-lender whose demat account or client account is allowed to be used or used for market transactions by anyone other than himself, for the purpose of any activity by such other, including manipulation or other fraudulent activities. A key operator referred to in these guidelines, includes the main manipulator and any other applicant who in the opinion of the IC or HPAC or Panel of WTM s may be so categorised. Chapter VI BENCHMARK AMOUNT IN DISCLOSURE RELATED DEFAULTS UNDER SEBI (SAST) REGULATIONS , SEBI (PIT) REGULATIONS AND OTHER DISCLO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efaults related to disclosures that are required to be made annually, and application is filed for settlement of such defaults, the amount for delay for every three months or part thereof shall be computed only for the first non-disclosure. In case the applicant complies with the annual reporting requirements for a few years, such compliance will not result in a higher base amount than would have otherwise be calculated for continuous defaults. #The period of delay is to be calculated from the last day, when the disclosure ought to have been made, as required by the regulations. In case a correct disclosure is made on time but filed in the wrong format, the Base Amount shall be reduced by 75%. TABLE VII- BASE AMOUNT - TRANSACTION SPECIFIC DISCLOSURES UNDER REGULATIONS 13(3), 13(4), 13(4A) AND CORRESPONDING 13 (6) OF SEBI (PIT) REGULATIONS 1992, PERCENTAGE OF SHAREHOLDING OR VOTING ACQUIRED BUT NOT DISCLOSED, etc. BASE AMOUNT * Upto 2% ₹ 1.5 lakh + ₹ 7,500/- For every three months delay or part thereof 2% to less than 5% &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng requirements or Disclosures on appointment of director or Any other disclosure related defaults that are not detailed in these guidelines, if deemed appropriate ₹ 2 lakh + ₹ 10,000/- for every three months delay or part thereof TABLE IX - BASE VALUE NATURE OF DEFAULT BASE VALUE a) Per se SAST or PIT or ICDR regulation, etc. violation, not falling in any of the below mentioned categories 1 b) Non-disclosure charge in combination with any other charge 1.1 c) Charge of non-disclosure, although timely related disclosure made under any other Regulation(s) 0.6 d) Charge of non-disclosure, although timely related disclosure made under any other regulation of SEBI (SAST) Regulations or listing agreement, etc. 0.55 e) Companies with paid-up share capital below ₹ 10 crore (not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and b are mutually exclusive. Chapter VII BENCHMARK AMOUNT FOR OTHER DEFAULTS BY INTERMEDIARIES , REGULATED ENTITIES, B (I/RE) : The Benchmark Amount for other defaults by intermediaries (I) and other regulated entities (RE) i.e. B(I/RE) may be computed on the basis of this Chapter. This Chapter is not applicable where default is dealt with under Chapter V or is by a CIS, mutual fund, etc., where the proposed remedy may be disgorgement or refund or winding up of the scheme or fund. However the IC or HPAC or Panel of WTM s may in cases of serious violations take the Benchmark Amount of the applicant as per the provisions securities laws if the amounts arrived at on the basis of the calculations are found to be low and not commensurate to the seriousness of the alleged default. B(I/RE) = SUM OF ALL BASE AMOUNTS AS PER TABLE XII + 25 % OF THE GROSS FEE EARNED* IN RESPECT OF THE MAJOR DEFAULTS, WHERE DETERMINABLE *A lower percentage may be taken in respect of Public Sector Undertakings. TABLE XII- BASE AMOUNT NATURE OF DEFAULT BASE AMOUNT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt shall be deposited in the Investor Protection and Education Fund of SEBI. c. Conduct related defaults may be settled only if the applicant has rectified its conduct and the investor grievances have been redressed to the satisfaction of SEBI. ********* 1 Substituted vide the Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) (Amendment) Regulations, 2017 w.e.f. 27.02.2017. Prior to substitution item 6 read as under: 6. The IA is to be calculated for each applicant. In a case where multiple applicants make a combined application for a default arising from the same cause of action, the IA will be calculated for each applicant, as per the applicable formula except in cases related to defaults under the Takeover Regulations where the acquirer and persons acting in concert (PAC) may be considered to have joint liability. 2 Inserted by the SEBI (Settlement of Administrative and Civil Proceedings)(Amendment) Regulations, 2016, w.e.f. 26-8-2016. 3 Omitted vide the Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) (Second Amendment) Regulations,2017 w.e.f. 27.12.2017. Inserted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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