INSUBCONTINENT EXCLUSIVE:
NEW DELHI: ICICI Bank made a slew of submissions to Sebi during a public consultation process for overhauling its settlement rules, but the
regulator did not see merit in most of the suggestions, officials said.
The suggestions made by the private sector major, which last week
clarified it has not filed any settlement plea as such with Sebi, covered issues ranging from timelines to limitation clause to applicable
payments.
The clarification followed some media reports wrongly quoting Sebi's top officials as saying that ICICI Bank has filed a
settlement plea with regard to an ongoing probe into alleged violations by the bank and its on-leave CEO Chanda Kochhar.
An ICICI Bank
spokesperson did not reply to a detailed set of queries regarding its submissions in the consultation process.
However, sources familiar
with the matter said the bank has been making its submissions for all major draft rules across sectors for years as a responsible
institution and it has a robust history of participating in public consultation processes.
One key submission by ICICI Bank in Sebi's
consultation process included applicants being allowed to seek settlement with a declaration that they "deny" the charges, as against the
proposed clause of seeking to settle either by "admitting" or "without admitting or denying".
Sebi felt any settlement with denial will
adversely impact proceedings against other co-accused and it has been rejecting settlement pleas while 'denying' the charges since beginning
The rules are similar in the US where applicants can settle a case "without admitting or denying".
The Securities and Exchange Board of
India (Sebi) had initiated the consultation process last month on recommendations made by a high-level committee and public comments were
sought till September 1.
Subsequently, Sebi last week presented a detailed proposal to its board, which approved the new guidelines to be
notified soon.
According to officials, the board was presented a detailed note on all submissions, along with Sebi's comments
These included submissions by ICICI Bank, a legal officer of state-run Allahabad Bank and two individuals.
One individual apparently
submitted that draft rules were framed to benefit Reliance Industries, which Sebi "denied at the outset as false and baseless allegations",
as per the documents presented by the regulator before its board.
On most submissions of ICICI Bank, Sebi's view was they "may not be
considered", but it made some "drafting changes" and corrected a few "typographical errors" flagged to it.
ICICI Bank and another
participant suggested that new regulations should specify recommendatory timelines for completion of various stages of the settlement
process.
Sebi said an earlier provision of a 6-month timeline was found impracticable and was therefore removed
However, Sebi agreed to issue internal directions requiring expeditious disposal.
A key proposed clause referred to applicants being
required to make "full and true disclosures" for alleged defaults.
ICICI Bank suggested such a disclosure should be required only if the
applicant decides to "admit" the charges, and the applicant should not be asked for voluntary disclosure
The bank suggested the settlement should be on the basis of the information found by Sebi on its own.
Sebi, however, said settlement
requires full disclosure to decide extent of the violation and non-disclosure of facts would be considered "fraudulent conduct".
On
settlement amount getting hiked by 25 per cent for pleas filed after expiry of the mandated 60-day period but within the maximum permissible
120 days of the notice, ICICI Bank suggested levying a simple interest of applicable bank rate for the exact number of days.
However, Sebi
favoured a one-time increase of 25 per cent.
ICICI Bank also suggested omitting a clause rejecting applications filed after 120-day
limitation period or after fixing of oral hearing in a probe, but Sebi rejected it citing the need for avoiding unnecessary delays and for
timely resolution of proceedings.
The bank also favoured that a fresh application can be considered in "exceptional circumstances" even if
an earlier plea in same case had been rejected
Sebi, however, said the expert committee felt belated applications should be rejected to avoid "forum shopping" at various stages.
A key
component of the new norms is outright rejection of settlement for alleged defaults having market-wide impact, causing losses to a large
number of investors, or affecting integrity of the market.
ICICI Bank had suggested to "omit" this clause, which Sebi felt was necessary in
the interest of investors.
The bank also suggested that in the event of a settlement order being passed, Sebi should not institute any
criminal proceedings against the applicant in relation to the same alleged default
Sebi said it does not do so as such.
On disgorgement of ill-gotten profits made or losses avoided by the applicant being made part of
settlement terms, ICICI Bank suggested it should be applicable only in cases of the applicant admitting to the charges.
However, Sebi said
disgorgement is not dependent on actual admission and a person cannot be allowed to profit from a default.
Sebi also did not find merit in
suggestions that information provided by a whistleblower or an approver should not be used in case of incomplete information or refusal to
cooperate.
In case of applicant being a corporate, a clause referred to Sebi requiring the settlement amount to be paid by officers in
default, including persons in charge of the corporate, to avoid burdening investors.
Sebi rejected the suggestion for omitting this clause
and said it can ask directors to pay the amount if a fraud is committed against the company and its shareholders using the corporate
device.
"Penalising the company in such instances will amount to making shareholders suffer twice," the regulator felt
