Analysis of SEBI’s Settlement Scheme, 2022

The SEBI Settlement Scheme 2022 was recently published by the Securities Exchange Board of India in a public notice dated August 19, 2022. Commencing on August 22, 2022, and running through November 21, 2022, is SEBI’s Settlement Scheme 2022. The current article gives an overview of the subject.

Brief History

A large number of organizations have appealed to the Securities Appellate Tribunal (“SAT”) in Mumbai following the end of the SEBI Settlement Scheme, in 2020. The Tribunal recently stated in one case, Shubham Singhal v. SEBI (SAT Appeal No. 191/2022, dated 13.05.2022,  that the settlement scheme failed for two main reasons: 

• The terms of settlement may have been troublesome, strict, and unprofitable, and 
• The scheme was issued at the height of the Covid pandemic. SAT ordered SEBI to rethink releasing a new plan in the aforementioned ruling.

The objective of SEBI’s Settlement Scheme, 2022

The main goal of SEBI Settlement Scheme 2022 is to give an option for settlement to the entity that meets the following criteria:

• In the illiquid stock options area of the BSE between the dates of 1 April 2014 and 30 September 2015, the firm should have undertaken reversal trades.
• The party against whose legal action has been taken is currently being heard by a forum or higher authority.

Eligibility criteria under SEBI’s Settlement Scheme, 2022

The following organizations are qualified to apply for the SEBI Settlement Scheme 2022, provided that an appeal has been submitted and the application is still pending before the Securities Appellate Tribunal:

• The company that executed reverse trades on the BSE’s illiquid stock options market between the first of April 2014 and the last day of September 2015 has been named, procedures have been started, and the matter is now being heard by one or more forums or authorities.
• Entity against which a penalty levying order has been issued; however, the penalty has not been paid, and as a result, recovery procedures have been started.

SEBI Settlement Scheme, 2022

The Securities and Exchange Board of India published a public notice on August 19, 2022, introducing the Settlement Scheme, 2022 (“the Scheme”). The Scheme’s purpose is to give entities who executed reversal trades in the illiquid stock options segment of the BSE between April 1, 2014, and September 30, 2015, and against whom proceedings have been initiated and are pending before any forum or authority, namely Courts/ Securities Appellate Tribunal (“SAT”), Adjudicating Officer, and Recovery Officer (provided an appeal has been filed and the same is pending before the SAT) an opportunity for settlement.

An entity seeking settlement under the Scheme must submit a settlement application in the specified format, available on the respective websites of SEBI and BSE, along with an application registration fee. The application form must be submitted, and the application fee and settlement amount must be paid online using the link given. There will be no need to produce any physical documentation.

Registration fees for Settlement Application

The organization applying for the SEBI Settlement Scheme 2022 must pay the following registration fees:

• In the case of a body corporate, INR 25,000 plus GST at 18%; 
• In the case of an individual, INR 15,000 plus GST at 18%.
• Such settlement application registration fees may only be paid using the official website’s portal in by online mode of transaction.

Note: Based on the number of contracts, the appropriate settlement sum under the SEBI Settlement Scheme 2022 would be decided. The official website can be used to acquire the settlement amount.

Requirements of Documents for Settlement Application 

An entity that wants to submit a settlement application under the Scheme must have the following documents in hand:

• Online submission of the scanned documents listed below:
• A copy of any waivers and undertakings that have been properly notarized, and stamped.
• Further, a copy of the applicant’s PAN card has been self-attested.
• Furthermore, a certified authentic copy of a settlement application.
• A Certified Genuine copy of the Tax Returns from the previous three years.
• A working Phone Number and Email Address
•  If applicable, a certified copy of the order with the necessary Documents
• However, the non-refundable settlement application registration fee of Rs. 15,000 for individuals and Rs. 25,000 for body corporations, plus GST at 18%.
•  Lastly, Payment of the settlement sum indicated by the applicant.

Steps to apply for SEBI’s Settlement Scheme, 2022

The entity can apply for the SEBI Settlement Scheme 2022 by doing the following:

• Step1:Visit https://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html
• Step 2: Use the drop-down arrow next to “Type of Category” to choose “Settlement Scheme”
• Step 3: Further, Enter PAN and Captcha and Select “Go”
• Step 4: Scan and submit the necessary documents. –
  • A settlement application in the format outlined in Annexure 1;
  • Copies of the waivers and undertakings that have been properly paid, notarized, and stamped in the manner described in Annexure 2.
  •  A copy of the applicant’s PAN that has been self-attested on non-judicial stamp paper is required.
• Step 5: Pay the registration fees for the settlement application.
• Step 6: Paying off the settlement sum

Points to keep in Mind

If an entity previously submitted a settlement application before the implementation of the SEBI Settlement Scheme 2022, such a business doesn’t need to submit an application fee again. Such an entity should take the following actions to bring the dispute to a close:

• Visit the official website
• Further, Choose “Settlement Scheme,” type in “PAN,” and
• Pay the agreed-upon settlement sum.
• Furthermore, the securities law will continue to be applied against the specified entity if it has not taken advantage of the SEBI Settlement Scheme.
• At last, a composite settlement order will be issued by the competent authority following the completion of the settlement scheme and record reconciliation.

Summing up

To prevent a last-minute rush, it is advised to submit a settlement application under the Scheme as soon as possible. From August 22, 2022, to November 21, 2022, the Scheme would be in operation. However, if the scheme is not used, actions against the companies will be maintained by applicable securities legislation rules after the Scheme’s conclusion in 2022.