Source update, October 10, 2026: This article describes notified settlement regulations, not fines imposed on a named company. See the SEBI regulation listing and PTI’s October 9 report. The commencement qualification below is attributed to TaxGuru’s reproduced notification; the official PDF could not be retrieved during this check. Notification should not be read as immediate replacement of the 2018 rules.
The Securities and Exchange Board of India (SEBI) has notified a new settlement framework that changes how alleged violations of securities laws are resolved. The Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations, 2026 introduce a formula-based method for calculating settlement amounts, a fast-track mechanism for eligible cases involving amounts of up to ₹10 lakh, and a revised approach to recovering wrongful gains separately from settlement payments.
The notification is dated October 6, 2026; notification and legal commencement are separate events. SEBI lists the 2026 regulations on its website on October 8. TaxGuru’s reproduction of regulation 1(2) says they take effect on the day succeeding the 30th day after notification in the Official Gazette, with repeal of the 2018 framework linked to commencement. The Gazette publication date and resulting effective date have not been independently confirmed for this article. The changes aim to make settlement terms more transparent and predictable, reduce unnecessary procedural delays and ensure that financial benefits obtained through violations are not counted twice when determining the amount payable. The new rules also expand opportunities for entities to settle certain regulatory proceedings, subject to eligibility conditions and the prescribed timelines.
What Has SEBI Changed in Its Settlement Rules?
Under the new framework, settlement terms will consist of three components: the settlement amount, disgorgement of wrongful gains wherever applicable, and remedial and regulatory terms (RRT), previously referred to as non-monetary terms.
The settlement amount will be calculated using a formula linked to the minimum penalty prescribed for the relevant violation under securities laws. The calculation will then be adjusted for factors such as the stage of proceedings, previous regulatory action, the seriousness of the violation, aggravating circumstances, mitigating circumstances and legal costs.
SEBI has said the revised method is intended to make settlement calculations easier to understand and less discretionary.
Key Changes Under SEBI Settlement Regulations 2026
| Feature | New provision |
|---|---|
| Settlement calculation | Formula-based method linked to the prescribed minimum penalty |
| Wrongful gains | Disgorged separately wherever quantified and applicable |
| Fast-track settlement | Available for eligible cases with settlement amounts up to ₹10 lakh |
| Application after show-cause notice | Time limit increased from 60 days to 90 days |
| Settlement notice before show-cause notice | Eligible entities may receive 60 days to apply |
| One-time settlement opportunity | 90-day window for specified pending proceedings |
| Additional payment under the one-time window | 20% additional settlement amount |
| Financial misstatement and fund diversion cases | Settlement permitted subject to appropriate remedial and regulatory measures |
Source: SEBI’s Settlement of Administrative and Civil Proceedings Regulations, 2026.
The framework applies to eligible administrative and civil proceedings under the securities laws covered by the regulations. It does not mean that every alleged violation can be settled or that settlement automatically removes all possible regulatory consequences.
New Formula for Calculating Settlement Amounts
One of the central changes is the introduction of a structured formula for determining the settlement amount.
The formula reported for the new framework is:
Settlement Amount = Base Amount × (S + R + G + A − M) + Legal Costs
The base amount is linked to the minimum penalty prescribed for the relevant violation. The calculation then considers factors associated with the proceeding, regulatory action, gravity of the violation and other circumstances.
| Formula component | What it considers |
|---|---|
| Base amount | Minimum penalty prescribed for the violation |
| S | Stage of the proceedings |
| R | Regulatory action or related factor specified under the framework |
| G | Gravity of the violation |
| A | Aggravating factors |
| M | Mitigating factors |
| Legal costs | Applicable legal costs added to the calculation |
The exact application of each factor is governed by the regulations and their schedules. The formula should therefore not be used to calculate an actual settlement amount without checking the applicable provisions.
The revised framework also prescribes minimum settlement amounts, including ₹3 lakh for first-time applicants and ₹7 lakh for other applicants, subject to the applicable rules and eligibility conditions.
The formula-based approach is intended to improve consistency across cases while allowing the regulator to account for the seriousness and circumstances of individual violations.
Wrongful Gains Will Be Calculated Separately
The new rules also address a concern about double counting when settlement terms are calculated.
Under the revised framework, wrongful gains, losses avoided or losses caused to investors will not be included in determining the base settlement amount. Where such amounts are quantified and applicable, they will instead be disgorged separately.
Disgorgement is the recovery of financial benefits obtained through wrongful conduct. It is distinct from the settlement amount, which resolves eligible regulatory proceedings under the settlement mechanism.
For example, if a market participant obtains an identifiable financial benefit through a securities-law violation, the regulator can calculate the settlement amount under the prescribed formula and separately require disgorgement of the wrongful gain, where applicable.
This distinction matters because the financial benefit obtained from a violation and the amount required to settle the regulatory proceedings serve different purposes. Separating them is intended to avoid counting the same amount twice within the settlement calculation.
SEBI Introduces Fast-Track Settlement for Cases Up to ₹10 Lakh
The new regulations create two types of fast-track settlement: a monetary-threshold-based route and a violation-based route.
Under the monetary-threshold route, cases in which the settlement amount does not exceed ₹10 lakh can move directly from the Internal Committee to a panel of SEBI’s whole-time members. This is intended to reduce procedural steps for eligible cases involving relatively small settlement amounts.
The violation-based route covers specified categories of violations, including certain disclosure-related matters. In these cases, SEBI can issue a notice offering the concerned entity an opportunity to settle by paying the amount specified in the notice. The settlement order is passed by the panel of members after the payment is made.
The fast-track mechanism does not remove the requirement to satisfy the applicable eligibility criteria. Nor does it mean that all cases involving an amount below ₹10 lakh will automatically qualify.
For companies and market participants, the mechanism could provide a more predictable route to resolving eligible cases without going through the full settlement process.
More Time to Apply for Settlement
The regulations also revise the timelines for submitting settlement applications.
Where a show-cause notice has been served, the period for applying for settlement has been extended from 60 days to 90 days. This gives eligible applicants more time to assess the allegations, evaluate the potential settlement terms and prepare the necessary application.
The framework also allows SEBI to issue a settlement notice, commonly referred to as a Wells Notice, before issuing a show-cause notice in eligible cases. The notice provides an opportunity to apply for settlement within 60 days.
This pre-show-cause settlement route is not available in every case. The reported framework excludes situations in which SEBI is considering initiating prosecution or passing an interim order.
The changes are intended to encourage early resolution where appropriate, while preserving the regulator’s ability to take stronger action in cases requiring it.
One-Time Settlement Window for Certain Pending Cases
The new regulations provide a one-time 90-day window from the commencement of the 2026 framework for specified pending proceedings.
The opportunity may cover entities that did not previously apply for settlement or whose applications under the 2018 framework were rejected, withdrawn or returned, subject to the conditions prescribed in the regulations.
Applicants using this route will be required to pay an additional 20% settlement amount. The provision is designed to give eligible entities another opportunity to resolve pending matters under the revised system.
Applications rejected earlier may also be considered at the appellate stage where the grounds for rejection no longer apply, subject to the relevant conditions and additional payment requirement.
Because the opportunity is limited by time and eligibility, entities with pending proceedings will need to verify whether their cases fall within the permitted categories and calculate the applicable payment before applying.
Can Financial Misstatement and Fund Diversion Cases Be Settled?
The new framework also provides for the settlement of cases involving misrepresentation of financial statements or diversion or siphoning of funds, subject to appropriate remedial and regulatory measures.
These measures may include disclosure requirements and steps to bring diverted funds back. The ability to settle such proceedings does not mean the conduct is exempt from scrutiny or that the regulator will waive corrective action.
Instead, the rules allow eligible cases to be resolved through settlement where the required financial and remedial conditions are met.
This provision is significant because financial misstatement and fund diversion can affect investors’ understanding of a company’s financial position and the integrity of the securities market. Requiring appropriate corrective measures helps distinguish settlement from simply paying an amount and leaving the underlying issue unaddressed.
The Bigger Picture
SEBI’s new settlement regulations represent an effort to make securities-market enforcement more structured. A formula-based calculation can improve predictability, while separate disgorgement of wrongful gains helps distinguish the settlement payment from the recovery of benefits obtained through violations.
The fast-track routes and expanded application timelines may reduce the burden of resolving eligible proceedings. At the same time, the framework retains conditions, financial obligations and remedial requirements intended to preserve deterrence and investor protection.
Looking Ahead
The new framework will come into force after the prescribed period following notification. Companies, listed entities, intermediaries and other regulated market participants should review the regulations to understand the settlement formula, eligibility requirements and deadlines relevant to their cases. Entities with pending proceedings should also assess whether they qualify for the one-time settlement window.
The impact of the regulations will depend on how consistently the framework is applied and how quickly eligible cases move through the revised process. The central objective is to make settlement more predictable and efficient without weakening SEBI’s ability to address violations, recover wrongful gains and require corrective action.
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