The capital markets regulator will soon issue new guidelines for the consent order mechanism, which has faced much criticism over the kind of penalties imposed on market participants.
?It (the new consent order norm) may be out in a couple of weeks,? Securities and Exchange Board of India (Sebi) chairman UK Sinha said on Friday on the sidelines of a seminar on mergers and acquisitions (M&A).
Consent orders settle administrative or civil proceedings against entities that may, prima facie, be found to have violated securities laws. In the US, the Securities and Exchange Commission settles over 90% administrative/civil cases through consent orders.
When Sebi adopted the mechanism in 2007, it was argued that consent orders could reduce regulatory costs and save time and effort spent in enforcement actions. Sinha, however, said inconsistencies were found in the way penalties were imposed on different market players for similar kinds of offence. The mechanism, which has collected over Rs 150 crore in settlement charges from over 1,000 cases, has attracted charges that the process of deciding the consent amount is opaque and depends only on negotiations.
Sinha said Sebi was open to looking at any changes that need to be made to the Takeover Code that governs all M&A transactions in the country. ?We framed the new norms six months back… We are willing to look at suggestions,? he said.
?There is some kind of apprehension that the threshold limits will work as obstacles for M&A activity in India, but we are looking at this. If concrete suggestions come out, we will consider them,? he explained.
The Sebi chairman also highlighted the fact that there needs to be greater coordination among financial regulators, adding the recent past has seen watchdogs coming together on a regular basis. ?Regulatory coordination is one area where we need to improve. One important development has been the creation of the Financial Stability Development Council,? he said. The last two years have seen cooperation improve dramatically, he added.
Last September, Sebi notified the new takeover rule under which an entity buying 25% in a listed firm must compulsorily make an open offer for 26% more from public shareholders.
