The Securities and Exchange Board of India (Sebi) has proposed a revamp of its settlement framework, including a simpler formula for calculating settlement amounts, lower additional charges for refiling withdrawn applications, and allowing applicants to seek settlement at the appellate stage before the Securities Appellate Tribunal (SAT) and the Supreme Court.
The proposals are part of Sebi’s consultation paper on the review of the Sebi (Settlement Proceedings) Regulations, 2018, and the draft Sebi (Settlement of Proceedings) Regulations, 2026.
The settlement regulation allows entities to resolve pending regulatory proceedings without an admission or denial of wrongdoing, for a settlement amount or other such terms.
Some recent major settlements include those filed by the National Stock Exchange (NSE) and Nippon Life’s India Asset Management, with amounts reaching several crores.
During financial year 2025-26 (FY26), Sebi received 439 applications for settlement and disposed of 170. However, 199 applications were rejected, withdrawn or returned. At the end of FY26, a total of 499 applications were pending.
The regulator said the review was undertaken to reduce litigation and provide an alternative mode of resolution that is simpler, less discretionary, and easier to implement.
A study by the market regulator for applications which could not reach settlement in the last two years showed that settlement amounts proposed and not accepted were average 8-times higher than the penalty amount ultimately imposed in such cases.
Under the proposed framework, Sebi has introduced a new formula for calculating settlement amounts. The base amount would be linked to the minimum penalties prescribed under the regulations, with different multipliers, depending on the type of applicant, stage of proceedings, etc.
The proposed calculations may reduce the settlement amount to a more reasonable level.
The proposed changes would also exclude wrongful gains made by applicants or losses caused to investors while determining the base amount for settlement. Such gains or losses would, however, continue to be considered for disgorgement as a non-monetary term.
The market regulator has also proposed greater clarity on how counts of default are calculated, including treating certain repeated acts arising from the same underlying conduct as a single default.
“Sebi’s proposal marks a significant shift in the philosophy of settlement, from an expensive and somewhat discretionary exception to a more credible alternative to prolonged enforcement litigation. The most important changes are the rationalisation of settlement amounts, removal of double-counting of wrongful gains, clearer treatment of multiple defaults, and the ability to settle even at appellate stages,” said Sumit Agrawal, senior partner at Regstreet Law Advisors and former Sebi officer.
“The real test, however, will be whether the final regulations also reduce residual discretion and provide sufficient certainty on when settlement can be refused. A settlement framework works best when it is predictable, proportionate, and attractive enough for parties to choose resolution over years of litigation,” added Agrawal.
Sebi has proposed reducing the additional settlement amount for refiling an application after withdrawal from 50 per cent to 20 per cent. It has also proposed allowing a fresh settlement application after an earlier rejection, including at the SAT or Supreme Court stage, subject to an additional 20 per cent settlement amount and other conditions.
The regulator has also proposed increasing the minimum filing fee from ₹15,000 to ₹25,000 for natural persons and from ₹25,000 to ₹35,000 for other entities. It has further proposed issuing a settlement notice before a show-cause notice in certain cases, giving an entity 60 days to apply for settlement.
