The Securities and Exchange Board of India (SEBI) is in the process of finalizing a standard operating procedure (SOP) for implementing settlement regulations, given the increasing number of settlement cases.

Additionally, SEBI aims to ensure uniformity in the application of the settlement formula across different cases.

Speaking at a conference in the national capital on Sunday, SEBI’s Whole Time Member, Kamlesh Chandra Varshney, stated that the regulator is actively working on the SOP for settlement regulations. “It is a work in progress… It is in final discussions,” he told PTI.

As per SEBI’s regulations, cases can be settled under specific conditions without the involved parties admitting or denying the facts and legal conclusions.

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Ensuring Consistency in Settlement Procedures

Varshney also highlighted the regulator’s focus on maintaining consistency in applying the settlement formula. “The formula involves assigning a certain value. Different individuals should arrive at the same value for similar situations in different cases… Essentially, we aim for uniformity across cases,” he explained.

The regulator is working to establish clear guidelines to ensure that penalties or settlement amounts are determined in a consistent manner. This move is expected to increase transparency and predictability in regulatory enforcement, reducing ambiguity for market participants.

At present, the process of settlement varies depending on the nature of the violation, the extent of financial impact, and the parties involved. However, SEBI’s effort to standardize the approach is intended to create a fairer and more structured resolution mechanism.

Increasing Trend of Settlements

During a session at the conference, Varshney pointed out that opting for a settlement often results in higher payments compared to litigation costs. This trend indicates that companies and individuals prefer to resolve regulatory matters swiftly rather than engage in prolonged legal disputes.

Reflecting on past trends, Varshney noted that five years ago, only 10 percent of enforcement orders led to settlements. However, this figure has now risen to 45 percent, indicating a significant shift toward settlements in regulatory matters.

This surge in settlement cases underscores the growing acceptance of SEBI’s settlement mechanism as an effective means of resolving disputes without lengthy litigation. Market participants are increasingly opting for settlements to mitigate legal risks and financial uncertainties.

Benefits of a Standardized Settlement Process

A well-defined SOP for settlements will benefit both SEBI and the entities involved in regulatory proceedings. A uniform approach will not only streamline case resolutions but also enhance market confidence in SEBI’s enforcement framework.

Standardization will help in preventing discrepancies where similar cases might have different financial implications due to subjective interpretations. Moreover, it will reduce potential delays caused by case-by-case negotiations and ensure a faster resolution of disputes.

Furthermore, by implementing a structured settlement mechanism, SEBI aims to encourage compliance and deter violations. Companies and market participants will have clearer expectations regarding regulatory penalties, which can act as a deterrent against potential misconduct.

As SEBI continues its efforts to refine the settlement process, industry experts anticipate that a well-defined SOP will contribute to a more efficient and transparent financial regulatory environment in India.