SEBI revamps settlement rules, introduces formula-based settlement amounts and fast-track route

Reports coming in for today mention that The Securities and Exchange Board of India (SEBI) has approved a new settlement framework that introduces a formula-based approach for calculating settlement amounts, creates a fast-track route for less serious violations and gives entities a fresh opportunity to settle certain pending proceedings.

The SEBI Board approved the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, which will replace the existing SEBI (Settlement Proceedings) Regulations, 2018. The new regulations will come into force the day after 30 days from the date of their notification.

Under the new framework, settlement terms will comprise the settlement amount, disgorgement of wrongful upside, where applicable, and remedial and regulatory terms (RRT), which were earlier referred to as non-monetary terms.

Formula-based settlement amount

SEBI has introduced a new formula for determining the settlement amount: Settlement Amount = Base Amount × (S + R + G + A − M) + Legal Costs

The base amount will be linked to the minimum penalty prescribed for the violation under securities laws, with multipliers based on the type of applicant. The formula will additionally take into account the stage of proceedings, regulatory action, gravity of the default, aggravating factors and mitigating factors.

The regulator has separately provided for wrongful upside, loss avoided or loss caused to market participants. These amounts will not be included while determining the base amount and, where quantified, will instead be disgorged separately.

SEBI stated this will remove the existing double counting of such amounts in the computation of settlement terms.

90 days to apply after show-cause notice

The new framework additionally expands access to settlement. Before issuing a show-cause notice, SEBI will be able to offering a settlement notice, or Wells Notice, giving an entity 60 days to file a settlement application. Such a notice will not be issued where SEBI is considering initiating prosecution or passing an interim order.

The time available to file a settlement application after service of a show-cause notice has additionally been increased to 90 days from 60 days.

SEBI has additionally introduced a fast-track settlement mechanism for specified violations and cases where the settlement amount does not exceed Rs 10 lakh.

For monetary-threshold cases, matters will move directly from the Internal Committee to the Panel of Whole Time Members. For specified violations such as disclosure-related violations, SEBI will offering a notice offering the entity an opportunity to settle by paying the amount specified in the notice. The settlement order will be passed by the Panel of Members once the settlement amount is paid. One-time settlement window

The new regulations provide a one-time 90-day window from the commencement of the 2026 regulations for entities that either did not apply for settlement earlier or whose applications were rejected, withdrawn or returned under the 2018 framework.

The window will be available for specified proceedings that are still pending before the Board and will require payment of an additional 20% settlement amount.

Applications that were rejected earlier may additionally be considered at the appellate stage if the grounds for rejection no longer apply. Such cases will additionally attract an additional 20% settlement amount.

Settlement of financial misstatement cases

SEBI has additionally provided for settlement of cases involving misrepresentation of financial statements or diversion or siphoning of funds, subject to appropriate remedial and regulatory terms.

These may include disclosures and measures to bring back diverted funds.

For adjudication proceedings, RRT will ordinarily not be imposed because such proceedings contemplate monetary penalties that can be addressed through a settlement amount.