SEBI board approves settlement scheme for NSEL case brokers, VCF regulation violations

The monetary settlement amount for NSEL-related cases will be determined based on two criteria. First, the number of units involved in paired contracts will attract a tiered fee structure.

The Securities and Exchange Board of India (SEBI) has introduced two one-time settlement schemes to resolve longstanding regulatory violations. One for brokers involved in the National Spot Exchange Ltd. (NSEL) case, and another for Venture Capital Funds (VCFs) that failed to wind up their schemes within the mandated timelines.

In the case of VCFs, SEBI has approved a settlement mechanism for entities that have completed migration to the SEBI (Alternative Investment Funds) Regulations, 2012. The scheme is designed to address non-compliance related to delays in winding up of schemes.

The settlement amount will be calculated in two parts: a base amount of Rs 1 lakh for delays of up to one year and an additional Rs 50,000 for every year or part of a year beyond that. In addition, a further charge ranging from Rs 1 lakh to Rs 6 lakh will be levied based on the cost of unliquidated investments at the time of applying.

Only those VCFs that have already transitioned to the AIF regulatory framework are eligible to avail the scheme. The responsibility for payment of the settlement amount and all related expenses will rest with the Investment Manager or Sponsor.

SEBI has set a deadline of January 19, 2025, for applications under this scheme. The scheme only applies to violations concerning scheme tenure and does not extend to any other regulatory or legal breaches.

SEBI had previously, in August 2024, issued a circular allowing VCFs to migrate to the AIF regime in view of the practical difficulties they faced in liquidating their investments within the scheme period. While the migration grants more time for winding up, it does not automatically regularise earlier delays, which this new settlement mechanism seeks to address without imposing any additional burden on investors.

SEBI has also rolled out a Settlement Scheme for stock brokers who traded on the NSEL platform and were registered as trading or clearing members under SEBI’s regulations. The scheme provides these brokers an opportunity to settle proceedings that have been initiated against them by SEBI for trading on the now-defunct exchange.

The monetary settlement amount for NSEL-related cases will be determined based on two criteria. First, the number of units involved in paired contracts will attract a tiered fee structure.  Rs 1 lakh for up to 25,000 units, Rs 1 lakh plus Rs 1 per unit for trades between 25,001 and 1,00,000 units, and Rs 1.75 lakh plus Rs 0.50 per unit for quantities above that, subject to a cap of Rs 5 lakh. Second, an additional amount equivalent to 0.01% of the total traded value in paired contracts will be added, with a minimum of Rs 5 lakh.

Non-monetary terms of the scheme include voluntary debarment ranging from one to six months, depending on the suspension or cancellation periods already imposed by SEBI. However, brokers named in charge sheets filed by agencies such as the Enforcement Directorate or Economic Offences Wing, or those declared defaulters by stock exchanges, are not eligible for the scheme. If any broker availing the settlement is later named in such a charge sheet, the benefit will be revoked.

SEBI clarified that this scheme is limited to violations under securities laws and does not affect any ongoing proceedings by other investigative or enforcement bodies. The scheme aims to bring closure to pending regulatory matters, reduce litigation, and enhance efficiency in enforcement, while still ensuring that investor interests and market integrity are upheld.