SEBI: Faster approval for eligible settlements up to Rs 10 lakh

The Securities and Exchange Board of India (SEBI) has issued new regulations changing how administrative and civil proceedings can be settled, including a revised payment formula and a faster approval route for eligible settlements up to Rs 10 lakh. The notification is dated 6 October 2026 and was published in the Official Gazette on 7 October 2026, according to an analysis published by snrlaw.in. The new framework takes effect on 7 November 2026, replacing the SEBI (Settlement Proceedings) Regulations, 2018, according to snrlaw.in and mmjc.in.

The Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations, 2026 separate the settlement amount from the recovery of wrongful gains. Mint reported that the framework also provides for corrective measures in eligible cases involving financial misstatements or diversion of funds. Settlement therefore involves more than a payment where the applicable terms require disclosures or the return of money.

A new basis for settlement amounts

Under the revised framework, the base amount is linked to the minimum statutory penalty for the alleged violation, rather than the earlier system of settlement tables. According to snrlaw.in’s analysis of Regulations 10 and 11, the calculation uses the minimum penalty for each count of default under the SEBI Act, the Securities Contracts (Regulation) Act or the Depositories Act, multiplied by a factor reflecting the applicant’s category.

Mint reported that the settlement calculation then takes account of the stage of proceedings, previous regulatory action, the gravity of the violation, aggravating and mitigating circumstances, and legal costs. Aggravating circumstances increase the amount; mitigating circumstances reduce it within the framework’s limits.

Those limits matter. According to snrlaw.in, the combined factor used to multiply the base amount cannot fall below one. The regulations also prescribe minimum settlement amounts of Rs 3 lakh for a first-time applicant and Rs 7 lakh for other applicants. A first-time applicant is someone who has neither received an adverse order from SEBI or an adjudicating officer nor previously obtained a SEBI settlement order.

As the analysis explains, an earlier application does not necessarily produce a lower payment. Where the combined factor remains below one, the base amount or the applicable minimum still determines the amount payable.

The calculation is not wholly mechanical. SEBI’s panel of whole-time members can set an amount above or below the calculated figure, provided it records reasons, according to snrlaw.in’s account of Regulation 25(4).

Wrongful gains, losses avoided and losses caused to investors are treated separately from the base settlement amount. Mint reported that, where quantified and applicable, these sums must instead be recovered through disgorgement, a settlement term requiring the surrender or recovery of such amounts. This removes the overlap created when the same gain influenced both the base amount and the separate recovery requirement.

Earlier notice and faster processing

The framework introduces an opportunity to seek settlement before a show-cause notice, the formal notice asking an entity to answer alleged violations.

According to snrlaw.in’s analysis of Regulation 5, SEBI must first issue a settlement notice setting out the substance of the probable charges and enforcement action. The recipient has 60 days from receipt to apply. Exceptions include cases where interim directions or prosecution are contemplated and those covered by violation-based fast-track settlement.

An application made before the show-cause notice holds up its issuance until the settlement application is disposed of or withdrawn, the analysis states. This creates a defined route for considering settlement before that stage of enforcement begins.

For smaller eligible settlements, the regulations shorten the approval process. Mint reported that cases with settlement amounts not exceeding Rs 10 lakh can move directly from SEBI’s internal committee to its panel of whole-time members.

The threshold alone does not establish eligibility. According to snrlaw.in’s account of Regulation 28, this route applies where no disgorgement or remedial and regulatory term is involved. Eligible applications bypass the High Powered Advisory Committee, an advisory stage in the settlement process.

A separate fast-track route depends on the category of violation rather than the payment threshold. Under that process, SEBI issues a notice offering settlement for a specified amount; payment is followed by a settlement order from the panel, Mint reported.

Corrective measures and exclusions

The regulations allow certain cases involving financial misstatements or diversion of funds to be considered for settlement with corrective requirements. According to Mint, these may include the necessary disclosures and bringing diverted funds back. They are conditions of settlement, not an automatic entitlement to close proceedings by paying a calculated amount.

Snrlaw.in’s analysis says Regulation 17 provides for disclosure of misstatements and the return of diverted funds to the company with interest in proceedings other than those solely seeking a penalty. Where an applicant is willing to return all diverted funds with interest, the diversion is not to prevent settlement specifically on the ground that it caused investor loss. Other eligibility restrictions remain relevant.

One restriction is mandatory exclusion. According to the same analysis, proceedings cannot be settled where the applicant has been categorised by a bank or financial institution as a wilful defaulter or fraudulent borrower under Reserve Bank of India guidelines, or is a fugitive economic offender.

Disclosure timing also changes. Snrlaw.in reported that required disclosures become settlement terms to be fulfilled, or undertaken in writing, after the panel accepts the terms. Its account of SEBI’s board memorandum explains the earlier concern: an applicant could make a disclosure and subsequently have its settlement application rejected.

The concern behind the redesign

The cost of settlement was part of SEBI’s case for reform. According to snrlaw.in’s account of the regulator’s consultation paper, a study of unsuccessful settlement applications followed by penalties found that proposed settlement amounts averaged eight times the penalties ultimately imposed, after excluding outliers. That finding concerned the studied cases, not every SEBI proceeding.

The analysis reported that SEBI wanted settlement amounts to remain a deterrent and carry a premium over enforcement outcomes, without becoming so expensive that settlement lost its purpose. SEBI estimated that its proposals would reduce the differential in the studied cases to about four times the eventual penalty; this was an estimate, not a measured result of the new regulations.

For applications already pending when the framework commences, one transition rule preserves terms approved by the panel. According to snrlaw.in’s account of Regulation 44, those applications will be dealt with on the approved terms under the 2018 regulations.