The Securities and Exchange Board of India (SEBI) has unveiled a new settlement framework designed to simplify, accelerate, and enhance the predictability of resolving administrative and civil proceedings related to securities law violations. These new regulations, known as the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, are set to replace the existing 2018 framework.
Key Changes in the New Framework
Under the updated guidelines, settlement terms will now encompass a settlement amount, the disgorgement of any wrongful gains, and specific remedial and regulatory terms (RRT). The RRT replaces what was previously referred to as non-monetary terms.
Revised Penalty Calculation Formula
A significant change is the introduction of a new formula for calculating the settlement amount. This formula will derive a Base Amount, which is linked to the minimum penalty prescribed for a violation under securities laws. This Base Amount will then be adjusted by various factors, including:
- The stage of the proceedings
- The nature of the regulatory action taken
- The gravity of the violation
- Aggravating and mitigating factors
Additionally, legal costs will be factored into the final settlement amount. SEBI has also clarified that wrongful gains, losses avoided, or losses caused to investors will be disgorged separately, where quantifiable, aiming to eliminate double counting in settlement calculations.
Extended Application Windows
The revised rules provide market entities with more time to seek settlements. Before issuing a show-cause notice, SEBI will now issue a settlement notice, granting the entity 60 days to file an application. This notice will not apply if prosecution or an interim order is being considered.
Once a show-cause notice has been served, the period for filing a settlement application will be extended from 60 days to 90 days, offering a longer window for compliance.
Fast-Track Settlement Mechanism
For less severe violations, SEBI has introduced an expedited fast-track settlement mechanism. Cases where the settlement amount does not exceed ₹10 lakh, along with specific disclosure-related violations, may qualify for this quicker resolution process.
One-Time Window for Pending Cases
The new regulations also include a one-time, 90-day window for entities that previously did not apply for settlement, or whose applications were rejected, withdrawn, or returned under the 2018 regulations. This facility covers specified proceedings still pending before the Board but will require an additional 20% payment on the settlement amount.
Interest on Disgorgement
Changes have also been made to the interest charged on disgorged amounts. In certain specified cases, an annual interest rate of 9% will apply. For other matters, a 12% rate will be charged after the final order until the settlement application is filed. Importantly, no interest will be charged on accrued interest.
These 2026 regulations are expected to come into force 30 days after their official notification, marking a significant shift in India's securities market regulatory landscape.