SEBI

Analysis of ISO Settlement Scheme, 2024 of SEBI

The Securities Exchange Board of India (SEBI) offered an opportunity to the entities to avoid delays in legal proceedings and disputes arising out of traded financial assets and illiquid stock options (i.e., a category of investment fund). Further, SEBI introduced the ISO Settlement Scheme 2024 to resolve prolonged litigation for alternative investment fund management in India. The blog aims to clarify and provide a detailed analysis of the ISO settlement scheme 2024 regulated under the Securities Exchange Board of India.

Comprehensive Background of ISO Settlement Scheme, 2024

The Securities Exchange Board of India introduced the third settlement scheme to address the need for trading activities conducted by certain entities in the illiquid stock options (ISO) segment between April 01, 2014, to September 30, 2015.

As specified in a public notice dated March 2024, the scheme is made in consonance with Section 145JB of the SEBI Act of 1992 r/w Regulation 26 of the SEBI (Settlement Proceedings) Regulations of 2018. The Scheme provides for the ISO Settlement, an adjudication opportunity offered to entities to settle trade reversals in the stock options segment of the Bombay Stock Exchange.

ISO Settlement Scheme, 2024: Objective and Insights

The ISO Settlement Scheme, 2024 offers diverse opportunities to the entities with the objective of addressing the trading irregularities in the illiquid stock options segment of the BSE. Further, it also aims to avoid delays in the conclusion of proceedings and long-lasting legal processes carried out for the adjudication of settlement disputes of the entities.

Entities seeking to settle their legal disputes must also have access to relevant information about dispute advisory services provided for resolving lengthy business proceedings and litigation challenges faced by organizations.

Mandatory Requirements for Availing ISO Settlement

The entities applying for settlement of pending suits must mandatorily comply with the requirements as specified in the ISO Settlement Scheme, 2024. The following is the list of mandatory requirements for availing ISO settlement in India:

• Entities must execute reversal trade in the illiquid stock options segment;
• Entities against whom proceedings have been initiated;
• Entities against whom orders with penalties have been passed;
• Entities against whom recovery proceedings have been initiated.

Documentation Needed for ISO Settlement Application

The entities intending to settle trading in illiquid stock options at BSE must mandatorily comprise certain necessary documentation. The following list includes the documentation needed at the time of applying for the ISO Settlement in India:

• Duly stamped undertaking and waiver (attached in Annexure 2);
• Applicants’ PAN Card;
• Settlement application (attached in Annexure 1);
• Trade name of the applicant;
• Address proof;
• Show cause notice or appeal (stage at which suit is pending);
• Date of show cause notice or appeal.

Master the Process of the ISO Settlement Scheme of 2024

The ISO settlement journey undergoes the following procedure for successful settlement of the proceedings pending before any authority or forum:

1. Submission of Application to SEBI

The applicant entity must first file and submit the online application, along with the necessary supporting documents, on the SEBI’s official website. This submission should include all required information to ensure the application is processed efficiently.

2. Payment of Settlement Application Registration Fees

Next, immediately after submitting the application, the applicants are required to pay non-refundable settlement application registration fees of around Rs. 25,000/ along with GST @ 18%.

3. Payment of Settlement Amount

Next, the applicants are required to pay the settlement amount, which is determined based on the applicant’s profile and number of contracts. Additionally, applicants must cover any legal costs, which will include a GST of 18%, if applicable.

4. Passing of Settlement Order

After making relevant checks and reconciling the records, the competent authority is required to pass a composite settlement order.

Insights into Validity Period for ISO Settlement Scheme, 2024

The ISO Settlement Scheme, 2024, has a validity period from March 11, 2024, to May 10, 2024, or any such other date as specified from time to time. Observing an upsurge in the number of entities availing themselves of the ISO settlement scheme. SEBI has extended the period for settlement to June 10, 2024, for the protection of the entities’ interests.

Further relevant updates regarding the validity of the scheme will be notified by the Securities Exchange Board of India from time to time. The entities availing the settlement opportunity under the scheme are mandatorily required to comply with the specified time.

Consequences of Non-Participation in ISO Settlement

Upon the expiry of the ISO Settlement Scheme, the consequences specified under the provisions of the Securities Laws apply to entities failing to avail themselves of or participate in the settlement opportunity. The consequences for non-participation in ISO settlement as specified in the Securities Laws include continuation of proceedings and other legal consequences.

Conclusion

The SEBI introduced the ISO Settlement Scheme, 2024 which is a strategic initiative undertaken for fostering the timely adjudication of disputes in compliance with the Indian securities market. The settlement of the illiquid stock options (which is a category of AIF) is a commitment towards maintaining market integrity by structuring the avenue of dispute resolution.

Seek the best settlement process for your entity engaged in the trading of illiquid stock options in India by visiting our website www.enterslice.com

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