SEBI- Settlement Scheme 2020

SEBI- Settlement Scheme 2020

On 27th July 2020, the Securities and Exchange Board of India introduced a Settlement Scheme 2020 for entities that executed trade reversals in the stock options segment of the Bombay Stock Exchange (i.e. BSE) for the specific period 1st April 2014 to 30th September 2015.

The entity against whom the proceedings are initiated/ pending is eligible to avail the benefit of the scheme. The new scheme so introduced is being briefly explained in the current article.

Background for the introduction of Settlement Scheme 2020

An analysis of the stock options section of the Bombay Stock Exchange was undertaken. Based on the study, it was noticed that during the period 1st April 2014 to 30th September 2015, by trade reversal in stock options, several entities constantly made a significant loss, whereas other entities constantly made a significant profit.

It appeared that the trading activities of such entities were abnormal. Since the significant losses were reversed with the same counterparties on the same day or the next day. SEBI had initiated adjudication proceedings against several such entities. However, recently, the Settlement Scheme 2020 is introduced as a one-time option for such entities to free themselves from such adjudication proceedings.

Noticeably, the Settlement Scheme providing the opportunity to settle the proceedings without having the stigma of penalty orders would undoubtedly help the affected entities to save their reputation from getting exposed.

Highlights of Settlement Scheme 2020

The features of the Settlement Scheme 2020 are summarized hereunder-

  1. Eligibility condition for availing the scheme-
  • The Scheme is available for those entities who have performed the trade reversals on the stock options segment of BSE,
  • The above transaction should have been undertaken during the period 1st April 2014 to 30th September 2015, and
  • The proceeding should have been pending against the entities.
  1. The time period for availing the benefit of the scheme-

The eligible entities can apply under the period from 1st August 2020 to 31st October 2020.

  1. Applicable fees for applying in the scheme-

The entity filing a settlement application under the scheme is required pay following fees-

Type of applicantApplicable fees
IndividualsINR 15,000
Body corporatesINR 25,000
  1. Suggestive settlement amount-

The board has considered following three objective parameters to arrive at suggestive settlement amount-

  • Artificial volume,
  • The number of non-genuine trades, and
  • The number of contracts resulting in the creation of artificial volume or non-genuine trades

Additionally, a consolidated settlement factor of 0.55 in all the cases (wherein, the entity has executed trade reversals) would apply to suggestive settlement amount.

Other important points

  • The entity is required to pay the settlement amount via an online platform, as available on the SEBI’s website.
  • The entities covered within the scheme, but, don’t avail the benefit of the settlement scheme 2020 shall be liable for action as per provisions of section 15-I of the Securities and Exchange Board of India Act, 1992.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.