The market regulator's decision to put resolution of disputes on the fast track is working well. In just over a year after announcing rules for consent orders, the Securities and Exchange Board of India has settled close to 83 cases.
Consent order is a new system of settling disputes in the capital markets by an agreement between a regulator and the accused through a penalty or a fine.
Sebi has garnered close to Rs 1.65 crore (Rs 16.5 million) through consent orders in this calendar year alone, though some say that the amount is substantially more.
Sebi has also settled close to 60 cases through compounding of offences (criminal cases). Last month a lot of cases related to the initial public offer scam were settled. The amount collected gets deposited into the consolidated fund of India.
Market players said that things have certainly moved fast as consent happens in a matter of months against the earlier practice of disputes going on for years.
The new system, which has reduced the number of litigations, has been modelled on the lines of a similar system in the US, which is home to the world's most advanced stock markets.
US regulator Securities and Exchange Commission (SEC) settles over 90 per cent of administrative/civil cases by consent orders against market intermediaries.
Sandeep Parekh, former Executive Director (incharge of the department of enforcement) of Sebi, said: "The consent and compounding process would reduce both the backlog of pending cases with Sebi and with the courts and also allow creative means of returning money to victims of securities fraud." Nearly 1,000 cases are still pending before the Sebi.
Before approving a consent order, a Sebi's high-power committee, headed by a retired high court judge takes into consideration factors such as nature of violation - whether the violation was intentional, the party's conduct during investigation, gravity of charge (charge of fraud, market manipulation or insider trading), history of non-compliance.
Currently, Sebi's orders can be challenged in a tribunal and then at the Supreme Court.
Sebi introduced the concept of consent orders in the capital market on April 20 last year for all matters that are pending regulatory action or cases pending before any court or the SAT to reduce its legal backlog.
