Ravi Mehta, a prominent investor in the Indian securities market, has been accused of violating the Securities and Exchange Board of India (SEBI) regulations. SEBI found that he had indulged in insider trading by accessi

CS Professional · Drafting, Pleadings and Appearances · PYQS · June 2025
Ravi Mehta, a prominent investor in the Indian securities market, has been accused of violating the Securities and Exchange Board of India (SEBI) regulations. SEBI found that he had indulged in insider trading by accessing unpublished price-sensitive information regarding a merger between two listed companies and making profits from the illegal trade. This activity was discovered when SEBI analyzed his trading patterns and found unusual transactions in shares of the two companies just before the merger announcement. SEBI initiated an investigation under Section 11B of the Securities and Exchange Board of India Act, 1992, along with relevant provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015. After completing the investigation, SEBI issued a show-cause notice to Ravi Mehta, alleging that he had violated regulations by trading based on State Industrial Corporation. Ravi Mehta, realizing the potential consequences of the charges, including penalties, suspension, and even a ban on trading in the securities market, opts to resolve the matter through settlement proceedings under the SEBI (Settlement Proceedings) Regulations, 2018. He expresses his intention to settle the matter without admitting or denying the charges but is willing to pay a settlement amount and adhere to specific conditions set by SEBI. The Settlement Officer of SEBI reviews Ravi Mehta's application for settlement under the SEBI (Settlement Proceedings) Regulations, 2018, which offers the opportunity for an expedited resolution of matters involving violations of securities laws, subject to payment of a settlement amount, and without further legal proceedings. In view of the above facts, answer the following questions: What is the scope of the SEBI (Settlement Proceedings) Regulations, 2018, and how do they apply to Ravi Mehta's case?

Answer & Explanation:

The SEBI (Settlement Proceedings) Regulations, 2018 provide for the provisions relating to terms of settlement and the procedure of settlement and matters connected therewith or incidental thereto. Regulation 2(1)(f) provides the definition of 'specified proceedings' which means the proceedings that may be initiated by SEBI or have been initiated and are pending before SEBI or any other forum, for the violation of securities laws, under Section 11, Section 11B, Section 11D, sub-Section (3) of Section 12 or Section 15-I of the Act or Section 12A or Section 23-I of the Securities Contracts (Regulation) Act, 1956 or Section 19 or Section 19H of the Depositories Act, 1996, as the case may be. Further, according to regulation 3(1), a person against whom any specified proceedings have been initiated and are pending or may be initiated, may make an application to SEBI. The scope of these regulations is broad and includes violations of securities laws such as insider trading, market manipulation, fraudulent trade practices, and other breaches of SEBI's regulations. Further, regulation 5 of SEBI (Settlement Proceedings) Regulations, 2018 provides the provisions relating to Scope of settlement proceedings. According to regulation 5, no application for settlement of any specified proceedings shall be considered, if: (a) an earlier application with regard to the same alleged default had been rejected; (b) the audit or investigation or inspection or inquiry, if any, in respect of any cause of action, is not complete, except in case of applications involving confidentiality; or (c) monies due under an order issued under securities laws are liable for recovery under securities laws. SEBI may also not settle any specified proceeding, if it is of the opinion that the alleged default, - i. has market wide impact, or ii. caused losses to a large number of investors, or iii. affected the integrity of the market. Further, SEBI may also not settle the specified proceedings where the applicant is a wilful defaulter, a fugitive economic offender or has defaulted in payment of any fees due or penalty imposed under securities laws. In the given situation, Ravi Mehta may make an application to settle the matter by admitting the charges, paying a monetary settlement amount and accepting certain terms and conditions proposed by SEBI.

Topics: Securities Law

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