Sebi introduces new settlement formula, fast-track route for cases up to ₹10 lakh

The Securities and Exchange Board of India (Sebi) has notified new regulations revising the formula for calculating settlement amounts and introducing a fast-track mechanism for cases involving settlement amounts of up to ₹10 lakh.

The new framework separates the disgorgement of wrongful gains, losses avoided or losses caused to investors from the settlement amount, eliminating the existing double counting of such amounts while determining settlement terms.

According to a notification dated October 6, the revised framework provides that settlement terms will comprise the settlement amount, disgorgement of wrongful gains, wherever applicable, and remedial and regulatory terms (RRT), earlier referred to as non-monetary terms.

The Settlement Regulations, 2026, follow the Sebi board's approval of the new rules at its meeting last month.

New formula to determine settlement amounts

Under the revised framework, the settlement amount will be calculated using a base amount linked to the minimum penalty prescribed for the violation under securities laws. This base amount will be adjusted based on factors such as the stage of proceedings, regulatory action, gravity of the violation, aggravating and mitigating circumstances, and legal costs.

Sebi clarified that wrongful gains, losses avoided or losses caused to investors will not be factored into the base amount. Instead, such amounts, wherever quantified, will be disgorged separately.

The change is intended to eliminate the double counting of these amounts while calculating settlement terms and make the process more transparent and predictable.

Fast-track settlement for cases up to ₹10 lakh

The regulator has introduced two categories of fast-track settlement: violation-based fast-track settlement and monetary threshold-based fast-track settlement.

"Fast track settlement shall be of two types --violation based fast track settlement and monetary threshold based fast track settlement," Sebi said in its notification.

Under the monetary threshold-based route, cases in which the settlement amount does not exceed ₹10 lakh will move directly from the internal committee to a panel of whole-time members.

Under the violation-based route, Sebi will issue a notice giving the concerned entity an opportunity to settle the matter by paying the amount specified in the notice. The settlement order will be passed by a panel of members after the payment is made.

The new framework also permits the settlement of cases involving misrepresentation of financial statements or diversion of funds, subject to appropriate remedial and regulatory measures. These may include disclosure requirements and the repatriation of diverted funds.

Sebi aims to make settlement process more predictable

The revised regulations are expected to simplify the settlement framework, reduce discretion and make the process easier to understand and more predictable. The fast-track mechanism is also intended to expedite the resolution of less serious matters.

At the same time, the regulator aims to ensure that settlement remains an effective mechanism for resolving regulatory proceedings without diluting the deterrent against violations of securities laws.