The Securities and Exchange Board of India (Sebi) has unveiled a comprehensive plan to redesign its settlement process, aiming to reduce costs, increase predictability, and minimise regulatory litigation, with new rules set to make settlements more practical and less discretionary.
Sebi has proposed a substantial redesign of its settlement regime, aiming to make the process simpler, more predictable and less dependent on discretion as it seeks to reduce the burden of regulatory litigation in India’s securities market. According to a consultation paper on the review of the Sebi (Settlement Proceedings) Regulations, 2018, and draft rules for 2026, the regulator wants a clearer method for calculating settlement sums, lower costs for people or firms that withdraw and refile applications, and permission for applicants to pursue settlement even after a case has moved to the Securities Appellate Tribunal or the Supreme Court.
The market regulator said the review was intended to make settlement a more practical alternative to drawn-out enforcement cases. In financial year 2025-26, Sebi received 439 settlement applications, disposed of 170 and saw 199 rejected, withdrawn or returned, while 499 remained pending at the year end. The regulator also said a study of cases that failed to settle over the past two years found that proposed settlement amounts were, on average, eight times higher than the penalties that were ultimately imposed. Recent high-profile settlements have included filings by the National Stock Exchange and Nippon Life India Asset Management, each involving amounts running into several crore rupees.
Under the proposed framework, Sebi would replace the present approach with a formula linked to minimum penalties under the regulations, using different multipliers depending on the applicant and the stage of proceedings. The regulator also wants to exclude wrongful gains and investor losses from the base amount used to calculate settlement, while still allowing those sums to be considered for disgorgement, a separate non-monetary remedy that requires handing back ill-gotten gains. It has also sought to clarify how repeated acts are counted, including treating some actions stemming from the same underlying conduct as a single default. Sumit Agrawal, senior partner at Regstreet Law Advisors and a former Sebi official, told Business Standard that the changes marked a shift away from an expensive and discretionary system towards one that could work as a real alternative to litigation. Sebi has also proposed cutting the extra charge for refiling after withdrawal from 50% to 20%, raising filing fees, and allowing some applicants 60 days to seek settlement before a show-cause notice is issued.
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