Bar & Bench has published a piece authored by Sumit Agrawal, Founder and Managing Partner of Regstreet Law Advisors on SEBI Settlement Scheme 2022 in the matter of Illiquid Stock Options.
The saga of penalty proceedings initiated by Securities and Exchange Board of India (SEBI) in ‘Illiquid Stock Options’ matter continues with its turns and twists. For a quick background, in 2015, SEBI had found that out of 21,652 entities who traded on BSEIndia (BSE) Stock Options Segment, as many as 14,720 entities were involved in generating artificial volume by executing reversal trades in the segment, i.e., these entities would either sell their options contracts only to buy them subsequently, or vice-a-versa, at a significant price differential thereby generating an artificial volume.
SEBI’s enforcement orders started landing at the doors of its appellate bodies Securities Appellate Tribunal (‘SAT’) and the Supreme Court of India. In one litigation, SAT nudged SEBI to explore an option of a Settlement Scheme.
SEBI came up with Settlement Scheme 1.0 which did not succeed. It left SEBI with two difficult choices – Either to amend the ‘one time’ Settlement Scheme tacitly admitting that it was uneconomical and not an optimal solution to the illiquid stock options matter, or to take it upon itself to appoint hundreds of Adjudicating Officers within SEBI to issue notices, conduct hearings and pass penalty orders in more than ten thousand matters which would have clogged the system for years to come.
SEBI found itself perhaps in a fix, to leave mid-way numerous enforcement actions it had initiated against the alleged errant entities. There could have been concerns such as loss of revenue to Government of India and also possible Central Bureau Of Investigation. (CBI) and Central Vigilance Commission – India (CVC) inquiries.
Yet again SAT has nudged SEBI to explore another option of a Settlement Scheme with attractive the terms of settlement so that the entities could come forward and settle the matter which will ameliorate the harassment of penalty proceedings to the noticees and at the same time would help to clear backlog of these pending matters before various Adjudicating Officers.
While SEBI would wish to bring an end to the illiquid stock options matter with the new settlement scheme, we may have to wait for few more months to know if this is the last of such schemes.
The Bar & Bench piece can be accessed through the following link.
Readers may send their questions or comments to Regstreet Law Advisors at info@regstreetlaw.com
Bar & Bench has published a piece authored by Sumit Agrawal, Founder and Managing Partner of Regstreet Law Advisors on SEBI Settlement Scheme 2022 in the matter of Illiquid Stock Options.
The saga of penalty proceedings initiated by Securities and Exchange Board of India (SEBI) in ‘Illiquid Stock Options’ matter continues with its turns and twists. For a quick background, in 2015, SEBI had found that out of 21,652 entities who traded on BSEIndia (BSE) Stock Options Segment, as many as 14,720 entities were involved in generating artificial volume by executing reversal trades in the segment, i.e., these entities would either sell their options contracts only to buy them subsequently, or vice-a-versa, at a significant price differential thereby generating an artificial volume.
SEBI’s enforcement orders started landing at the doors of its appellate bodies Securities Appellate Tribunal (‘SAT’) and the Supreme Court of India. In one litigation, SAT nudged SEBI to explore an option of a Settlement Scheme.
SEBI came up with Settlement Scheme 1.0 which did not succeed. It left SEBI with two difficult choices – Either to amend the ‘one time’ Settlement Scheme tacitly admitting that it was uneconomical and not an optimal solution to the illiquid stock options matter, or to take it upon itself to appoint hundreds of Adjudicating Officers within SEBI to issue notices, conduct hearings and pass penalty orders in more than ten thousand matters which would have clogged the system for years to come.
SEBI found itself perhaps in a fix, to leave mid-way numerous enforcement actions it had initiated against the alleged errant entities. There could have been concerns such as loss of revenue to Government of India and also possible Central Bureau Of Investigation. (CBI) and Central Vigilance Commission – India (CVC) inquiries.
Yet again SAT has nudged SEBI to explore another option of a Settlement Scheme with attractive the terms of settlement so that the entities could come forward and settle the matter which will ameliorate the harassment of penalty proceedings to the noticees and at the same time would help to clear backlog of these pending matters before various Adjudicating Officers.
While SEBI would wish to bring an end to the illiquid stock options matter with the new settlement scheme, we may have to wait for few more months to know if this is the last of such schemes.
The Bar & Bench piece can be accessed through the following link.
Readers may send their questions or comments to Regstreet Law Advisors at info@regstreetlaw.com