In line with its objective to bring clarity in scope and
transparency in procedural framework, SEBI has revamped its
existing consent order framework vide its circular no.
CIR/EFD/1/2012 dated May 25, 2012 ("New
Circular"). In terms of the New Circular, SEBI has,
inter-alia, modified and to some extent curtailed the
scope and applicability of the consent order framework. Some of the
important amendments introduced, pursuant to the New Circular, are
Certain serious offences (as listed below) shall not be
considered by SEBI unless the facts and circumstances so
1. Exclusion of certain defaults
Offences pertaining to insider trading;
Serious fraudulent and unfair trade practices causing
substantial losses to investors;
Failure to make an open offer;
Front-running (taking advantage of sensitive and confidential
information in anticipation of gain);
Failure to redress investor grievances;
Mutual fund defaults
Non compliance of summons issued by SEBI or orders of SEBI
Failure to make material disclosures under ICDR and debt
Scope and applicability of consent order framework curtailed
Serious offences like offences pertaining to insider trading,
front running, failure to make an open offer, failure to redress
investor grievances, serious fraudulent and unfair trade practices
etc. - out of the ambit of consent order mechanism;
Disposal mechanism streamlined and expedited
Indicative time limit of 6 months for disposal of consent
Constitution of Internal committee for assisting the High
Powered Advisory Committee
Criteria for consideration of consent application restated
2. Restated criteria for consideration of consent
Application for consent orders will not be considered:
i. If the investigation/ inspection with respect to the alleged
default is pending;
ii. If an alleged default is committed within a period of
2 years from the date of any consent order, except minor
iii. If the applicant has already obtained more than 2 consent
orders, then for a period of 3 years from the date of the last
iv. If more than one proceeding for the same cause of action is
pending, except if it is for all proceedings;
v. If consent application is filed after 60 days: (a) from the
date of this circular in case of pending proceedings as on date;
and (b) from the date of service of show cause notice issued by the
Designated Authority / Adjudicating Officer, Designated Member and
Whole Time Member ("WTM").
3. One application for Multiple
A single application may be considered for multiple proceedings,
if arising out of the same cause of action.
4. Constitution of Internal Committee
An Internal Committee comprising of SEBI officials not
associated with the case for assisting the High Powered Advisory
Committee ("HPAC") shall be constituted
which shall formulate the terms of the consent order for
consideration of HPAC. Recommendations made by HPAC shall be placed
before the panel of 2 WTM's for their approval which has the
power to increase or decrease the penalty or dismiss the
5. Disposal Mechanism
The mechanism for consideration and disposal of consent
application has been streamlined and expedited. Consent application
will be disposed of preferably within 6 months from the date of
SEBI has, by revisiting the existing procedural framework, given
a clear message that recourse to consent order mechanism is no more
an easy route available to offenders committing serious violations.
SEBI has also attempted to bring clarity and transparency in the
consent order procedural framework which will help in removing
ambiguities and result in expeditious disposal of cases without
resorting to long drawn litigation process. The issuance of the New
Circular appears to be a welcome move.
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