Decisions taken by SEBI at its Board meeting held on 24th September, 2026
1. Overall regulatory significance
The proposed SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 represent a substantial restructuring of the settlement mechanism presently governed by the SEBI (Settlement Proceedings) Regulations, 2018.
The principal shift appears to be from a relatively discretionary settlement framework towards a more structured, formula-driven and differentiated mechanism. The proposed framework seeks to bring greater predictability to the determination of settlement amounts while simultaneously expanding access to settlement and creating expedited mechanisms for relatively less serious matters.
The changes can broadly be grouped into six areas:
- Reconstitution of settlement terms
- Formula-based computation of settlement amounts
- Separate treatment of disgorgement
- Wider and earlier access to settlement
- Special treatment of particular categories of proceedings
- A defined interest mechanism for disgorgement
2. Settlement Terms
Under the proposed framework, settlement terms will comprise:
- Settlement Amount
- Disgorgement of wrongful gains, where applicable; and
- Remedial and Regulatory Terms (RRT), where applicable.
The replacement of the expression "Non-Monetary Terms" with "Remedial and Regulatory Terms" appears significant from a regulatory perspective.
The terminology better reflects the purpose of such conditions. These terms are not merely alternatives to monetary payments; they may require the applicant to undertake specific remedial, corrective, disclosure or compliance-related actions.
Thus, the settlement framework would effectively distinguish between:
Monetary consequences
→ Settlement Amount + Disgorgement
and
Regulatory/remedial consequences
→ RRT.
This distinction should improve conceptual clarity in settlement orders.
3. Formula-based determination of settlement amount
One of the most significant changes is the introduction of a structured formula:
Settlement Amount = Base Amount × (S + R + G + A − M) + Legal Costs
The proposed methodology introduces multiple variables, including:
- Base Amount (BA) – linked to the minimum penalty prescribed under securities laws;
- S – Stage of proceedings
- R – Regulatory action factor
- G – Gravity factor
- A – Aggravating factors
- M – Mitigating factors
This represents a movement towards standardisation and consistency in determining settlement amounts.
Under a formula-driven framework, applicants should theoretically have greater visibility regarding the factors influencing the monetary settlement. At the same time, the formula does not eliminate discretion altogether, since the determination of factors such as gravity, aggravating circumstances and mitigating circumstances will still require regulatory assessment.
Therefore, the framework may be described as structured discretion rather than complete elimination of discretion.
That distinction is important.
4. Separate treatment of wrongful gains
The proposed framework expressly separates wrongful gains, loss avoided and loss caused to investors from the calculation of the Base Amount.
Where such amounts can be quantified, they will instead be disgorged separately.
This is an important conceptual change because it seeks to prevent the same economic consequence from effectively being reflected twice—once in the settlement amount and again through disgorgement.
The proposed framework therefore appears to establish a clearer distinction between:
Penalty/settlement component
and
Restitutionary/disgorgement component.
This should improve transparency in cases where wrongful gains or investor losses are capable of quantification.
5. Expansion of access to settlement
The proposed Regulations significantly broaden the opportunities available to an entity to seek settlement.
A. Settlement before issuance of SCN
The introduction of a settlement notice prior to the issuance of a show cause notice, commonly described as a Wells Notice mechanism, is particularly significant.
The applicant would receive 60 days to submit a settlement application.
This creates an opportunity for the matter to be resolved at an earlier stage, potentially reducing:
- enforcement expenditure;
- regulatory proceedings;
- litigation;
- time taken for final resolution; and
- uncertainty for the concerned entity.
However, the proposed exclusion where prosecution or an interim order is contemplated indicates that this early-settlement mechanism is not intended to apply universally.
B. 90-day period after SCN
The extension of the application period from 60 days to 90 days following service of an SCN provides applicants with additional time to evaluate the allegations, quantify potential exposure and formulate settlement terms.
From a compliance-management perspective, this is a meaningful procedural relaxation.
6. Fast-track settlement
The proposed fast-track mechanism is another important development.
It introduces two broad routes:
Monetary threshold-based route
Where the settlement amount does not exceed ₹10 lakh, the matter can proceed through a shortened institutional process.
Violation-based route
Certain specified violations, particularly disclosure-related violations, can follow a fast-track mechanism under which SEBI may issue a notice specifying the amount payable for settlement.
This mechanism is intended to enable proportionate regulatory treatment.
In other words, matters involving relatively limited monetary exposure or specified categories of violations need not necessarily undergo the same procedural route as more serious enforcement matters.
7. One-time transition mechanism
The proposed 90-day one-time window for entities whose applications were not made earlier, or whose applications were rejected, withdrawn or returned under the 2018 Regulations, is an important transitional provision.
However, the benefit is subject to:
- the proceedings being within the specified categories;
- the proceedings remaining pending before the Board; and
- payment of an additional 20% settlement amount.
This provision appears designed to facilitate transition from the 2018 framework to the 2026 framework while preventing the transitional opportunity from becoming an unrestricted reopening of concluded matters.
8. Appellate-stage settlement
The provision permitting previously rejected applications to be considered at the appellate stage, where the grounds for rejection no longer exist, represents another expansion of settlement access.
The additional 20% settlement amount functions as an additional economic consequence for availing this route.
From a regulatory-design perspective, this creates an additional opportunity for resolution while preserving a distinction between an ordinary settlement application and one pursued after an earlier rejection.
9. Adjudication proceedings
The treatment of adjudication proceedings is particularly relevant for listed companies, intermediaries and other regulated entities.
The proposed position is that RRT will ordinarily not be imposed in adjudication proceedings, since adjudication proceedings principally contemplate monetary penalties.
However, this does not eliminate the possibility of:
- disgorgement of quantified wrongful gains;
- disgorgement relating to loss avoided or loss caused to investors; and
- appropriate disclosure requirements in disclosure-related violations.
This distinction reinforces the difference between penal consequences and remedial/regulatory obligations.
10. Financial statement misrepresentation and diversion of funds
The express recognition that matters involving:
- misrepresentation of financial statements; and
- diversion or siphoning of funds
may be settled is noteworthy.
However, settlement in such cases is not merely a monetary exercise. The proposed framework contemplates appropriate RRT, including:
- disclosures; and
- bringing back diverted funds.
This demonstrates that the settlement mechanism is intended to address the underlying regulatory harm rather than simply provide an alternative method of paying a monetary amount.
11. Interest on disgorgement
The proposed interest framework is another material change.
For proceedings pending before the Board:
9% p.a. from the date of violation until filing of the settlement application.
For other matters:
9% p.a. from the date of violation until the final order, followed by
12% p.a. thereafter until filing of the settlement application.
The provision that interest will not be charged on interest is also significant.
This creates a defined methodology for calculating the time value associated with disgorgement and provides greater certainty than an entirely discretionary approach.
12. Key professional takeaway
The proposed Regulations can be viewed as introducing four broad principles into SEBI's settlement framework:
Predictability
The formula for settlement amounts introduces greater structure into monetary determination.
Proportionality
Fast-track mechanisms and differentiated treatment allow less serious matters to be dealt with through a simpler process.
Early resolution
Settlement can potentially occur before issuance of an SCN, thereby encouraging earlier resolution of enforcement matters.
Separation of consequences
The framework more clearly distinguishes between settlement amounts, disgorgement and remedial/regulatory obligations.
