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 SEBI found that he had indulged in insider trading by accessing unpublished price-sensitive information regarding a merger between two listed companies and making profits from the illegal trade.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 are the factors to be considered by SEBI to arrive at the settlement terms under the SEBI (Settlement Proceedings) Regulations, 2018?

Answer & Explanation:

Regulation 10 of SEBI (Settlement Proceedings) Regulations, 2018 provides the provisions for Factors to be considered to arrive at the settlement terms. It states: While arriving at the settlement terms, the factors indicated in Schedule-II may be considered, including but not limited, to the following: (a) conduct of the applicant during the specified proceeding, investigation, inspection or audit; (b) the role played by the applicant in case the alleged default is committed by a group of persons; (c) nature, gravity and impact of alleged defaults; (d) whether any other proceeding against the applicant for non-compliance of securities laws is pending or concluded; (e) the extent of harm and/or loss to the investors' and/or gains made by the applicant; (f) processes that have been introduced since the alleged default to minimize future defaults or lapses; (g) compliance schedule proposed by the applicant; (h) economic benefits accruing to any person from the non-compliance or delayed compliance; (i) conditions which are necessary to deter future non-compliance by the same or another person; (j) satisfaction of claim of investors regarding payment of money due to them or delivery of securities to them; (k) any other enforcement action that has been taken against the applicant for the same violation; (l) any other factors necessary in the facts and circumstances of the case. Further schedule II inter alia provides for: (i) Guidelines for arriving settlement terms (ii) Indicative Amount and the Settlement Amount

Topics: Securities Law

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