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Sebi May Allow Settlements in Fund Siphoning
21 Sep
Summary
- Sebi proposes fund offenders return money with interest.
- A new mutual fund-only category for portfolio services is planned.
- The regulator aims for a more pragmatic enforcement framework.
The Securities and Exchange Board of India (Sebi) is contemplating a significant change in its enforcement strategy, aiming to address fund siphoning cases more effectively. Under consideration is a proposal that would allow companies and individuals accused of siphoning funds from listed entities to settle their cases.
Currently, Sebi has largely restricted settlements in cases involving fund diversion or misstated financial accounts due to their potential to harm investors and market integrity. However, the proposed framework would require offenders to return the misappropriated funds along with interest to the company.
This shift is seen as a move towards a more pragmatic enforcement structure. Experts suggest that allowing settlements with meaningful restitution could serve investors and the market better than prolonged legal battles. Sebi's board is set to discuss these proposals on September 24.
In addition to the settlement reforms, Sebi is also planning to introduce a new category specifically for mutual fund portfolio management services (PMS). This comes as Sebi reviews its settlement applications, noting that settlement amounts proposed but not accepted were significantly higher than penalties eventually paid.
