India’s markets regulator has introduced a stage-based settlement formula that separates the cost of closing a securities-law case from disgorgement and investor compensation.
India’s markets regulator has redrawn the financial logic of settlement in securities-law cases, separating the cost of ending a case from the obligation to return illicit gains or compensate investors. Under the revised framework, the final bill will also depend on how far a case has already progressed, lawyers said.
The Securities and Exchange Board of India notified the Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations, 2026, on October 9, replacing the 2018 rules. The new regime sets out how settlement amounts are to be calculated, how remedial obligations are to be treated and when different kinds of payments must be routed to the government or to SEBI’s investor protection fund.
Practitioners say the most important change is conceptual as well as financial. Pranav Bhaskar, senior partner at SKV Law Offices, said the revised method requires a detailed, transaction-by-transaction calculation and treats the settlement amount as distinct from disgorgement, where that is relevant. In practical terms, that means a person or company negotiating a deal with the regulator may still have to return wrongful gains or cover losses caused to investors even after paying to close the case.
The structure is intended to make exposure clearer at the outset. Siddharth Batra, an advocate on record at the Supreme Court of India, said the revised approach gives applicants better visibility on likely costs before they decide whether to settle. He also pointed to the new 60-day window for filing a settlement application before a show-cause notice is issued, describing it as a measure that adds certainty and discipline.
The regulations also build in a stage-based formula that increases the settlement amount as proceedings advance. According to the new framework, the factor is lower for a voluntary application, rises once an application is made before a show-cause notice, and increases further after such a notice has been issued. Tushar Kumar, an advocate at the Supreme Court of India, said the clearer methodology should help applicants gauge their potential liability earlier and make better-informed decisions. He also described the extra charge for refiling at the same stage as a balanced compromise.
The treatment of money recovered under the framework is also more clearly divided. Settlement amounts are credited to the Consolidated Fund of India, while disgorgement and any applicable interest go to SEBI’s Investor Protection and Education Fund. That distinction matters because it reinforces the difference between paying to resolve a regulatory proceeding and handing back profits or losses tied to the alleged misconduct.
Related reporting says the new rules also provide for fast-track settlement in specified cases, confidentiality for some cooperating applicants and special transitional provisions for matters already pending. Taxmann and other legal commentaries said the overhaul is designed to make the system more formula-driven and less discretionary, with the aim of speeding up resolution while preserving SEBI’s ability to seek restitution where wrongdoing has led to investor harm.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
