Jul 29, 2020

SEBI’s First Settlement Scheme- Illiquid Stock Option Matters

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In December, 2018 SEBI came out with SEBI (Settlement Proceedings) Regulations 2018. These Regulations also provided for the new provision of “Settlement Scheme” wherein SEBI was given the power to specify specific terms and procedures of settlement of specified proceedings for any class of persons involved in respect of any similar specified defaults.

With the power so vested, SEBI has for the first time vide its Press Release dated 27.07.2020 proposed to provide an Onetime Settlement Scheme to the entities involved in “trading in illiquid stock option” segment at BSE.

As per report prepared by SEBI in consultation with Bombay Stock Exchange (BSE) a total of 14,720 entities were involved in generation of artificial volume by executing non-genuine/reversal trades at stock option segment of BSE. SEBI has initiated adjudication proceedings against 567 entities as of now.

Who Can Apply Under the Scheme and Other Parameters

  • Eligibility: Entities who have executed trade reversals on the stock options segment of BSE during the period from April 1, 2014 to September 30, 2015 against whom any proceedings are pending initiated by SEBI.
  • Validity of the Scheme: Onetime settlement period shall commence on August 01, 2020 and end on October 31,2020 (both days inclusive).
  • Statutory Fees: Rs. 15,000 for individuals; Rs. 25,000 for Body Corporates.
  • SEBI will consider three objective parameters viz., artificial volume, number of non-genuine trades and number of contracts resulting in creation of artificial volume/ non-genuine trades to arrive at an Indicative Settlement Amount.
  • A uniform consolidated Settlement factor of 0.55 in all cases wherein the entities had executed reversal trades.


With the large number of entities involved having acted in similar pattern, deploying a whole legal machinery in adjudicating these entities and then fighting it out in SAT and Supreme Court to conclude the same, would have involved a lot of time and efforts of the Regulator. Amnesty schemes and one time settlements are not uncommon under Income Tax Act and now SEBI proposing the same is a welcoming step. This will also give opportunity to the entities to save them from legal hassles and settle the matter in one go and have peace of mind.

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