SEBI Rolls Out Settlement Scheme For NSEL Stockbrokers

The Securities and Exchange Board of India introduced on Wednesday a settlement scheme for stockbrokers who traded on the National Spot Exchange Ltd. platform, according to a press release.

Traders, whose funds were frozen in the July 2013 NSEL payment crisis, anticipate significant relief from this long-awaited move.

SEBI announced the scheme specifically for stockbrokers facing ongoing enforcement actions from the regulator. By participating, these brokers can expedite the resolution of their pending proceedings.

The SEBI board recently approved significant reforms to boost investment via alternative investment funds. They've now allowed Category I and II AIFs to offer co-investment schemes, which will help AIFs and investors jointly support capital formation in unlisted companies.

Under the newly approved framework, 'Co-investment' means that the manager or sponsor of an AIF, or an investor in Category I and II AIFs, can invest in unlisted companies alongside the main AIF investment.

For example, if a company needs Rs 300 crore and an AIF scheme invests Rs 100 crore, the fund manager can now offer investors the chance to co-invest the remaining Rs 200 crore through the same scheme.

The portfolio management services route previously facilitated most co-investments.

A SEBI-appointed working group, however, observed multiple challenges with this approach. They identified the necessity for dual registration under both AIF and PMS regulations, plus operational difficulties for unlisted companies managing many shareholders.

To address these issues, the working group recommended direct co-investment within the AIF framework. SEBI now permits creating a co-investment scheme under the AIF regulations.

Each co-investment in an unlisted company will be handled through a separate CIV scheme. Additionally, SEBI will relax certain regulatory requirements for these CIV schemes that typically apply to regular AIF schemes.

Investors now have two parallel co-investment routes: the traditional PMS route and the new CIV scheme under the AIF umbrella.

On the settlement scheme for NSEL brokers, SEBI clarified that the proposal was approved by the competent authority, following the recommendations of its High-Power Advisory Committee. The matter was placed before the board for information and implementation.

The non-monetary terms of the settlement will vary, with voluntary debarment ranging from one to six months, depending on the severity of actions previously ordered. If a broker has already served a period of debarment under earlier SEBI directions that duration will be adjusted against the new term.

However, SEBI has specified that the scheme excludes certain brokers, specifically those named in charge sheets filed by the Economic Offences Wing, Enforcement Directorate, or other law enforcement agencies in the NSEL matter, as well as those declared defaulters at stock exchanges.

Last month, NSEL announced that it received over 90% positive response from traders regarding a Rs 1,950-crore one-time settlement offer.

The board also approved a proposal to review the regulatory framework for Angel Funds under AIF regulations to rationalise their fundraising and enhance ease of doing business.

Also, SEBI board has given the green signal to mandate select shareholders, including directors, key managerial personnel and current employees, to hold shares in demat form before filing an initial-public-offering document.

These measures will help eliminate inefficiencies and risks associated with physical share certificates, including loss, theft, forgery, and delays in transfer and settlement.

(With Inputs From PTI)