SEBI proposes rationalised settlement amounts for market-wide impact cases
SEBI has proposed a new formula for settlement amounts and an opening for settling cases with market-wide impact, which the 2018 framework kept outside the normal settlement route. The proposals are in the SEBI consultation paper on review of the SEBI (Settlement Proceedings) Regulations, 2018, dated 14 August 2026, which sought comments on draft SEBI (Settlement of Proceedings) Regulations, 2026 by 4 September 2026. Listed companies, promoters, directors, KMPs, intermediaries and their advisers who face SEBI show cause notices should follow the changes, because they affect how much a settlement costs and which cases can be settled at all.
Why SEBI wants to rationalise settlement amounts
Settlements are made under section 15JB of the SEBI Act, 1992, section 23JA of the Securities Contracts (Regulation) Act, 1956 and section 19-IA of the Depositories Act, 1996. SEBI studied cases where settlement failed and found that the settlement amounts proposed but not accepted were, on average, 8 times higher than the penalty finally imposed in those cases. The paper says the new method would bring this ratio down to about 4 times, which it considers more reasonable.
The proposed formula
The draft computes the settlement amount as Base Amount x (S + R + G + A - M). The Base Amount is the minimum penalty specified for the violation multiplied by a factor that depends on who the applicant is. S reflects the stage of the proceeding, R prior regulatory action, G the gravity of the violation, A aggravating factors and M mitigating factors. The settlement amount cannot be less than Rs 3 lakh for a first-time applicant or Rs 7 lakh for others.
| Applicant type | Base Amount multiplier |
|---|---|
| Independent director | 2 |
| Natural person | 2.5 |
| Non-executive director | 3 |
| Executive director, promoter or KMP | 3.5 |
| Company, intermediary or pooled investment vehicle | 4 |
| Market infrastructure institution | 5.5 |
Wrongful gains would no longer feed into the Base Amount. They would be dealt with separately through disgorgement, so the same gain is not counted twice. For disgorgement, the paper proposes interest at 9% a year from the date of the transaction and 12% a year after a final order.
Market-wide impact cases
Under the current framework, SEBI may decline to settle a case that in its opinion has market-wide impact, caused loss to a large number of investors or affected the integrity of the securities market. The paper notes that such cases at present do not pass through the Internal Committee (IC) and the High Powered Advisory Committee (HPAC). SEBI proposed that these factors should now be considered by the IC and HPAC, which will give recommendations to the panel of Whole Time Members. Where the impact can be cured through monetary and non-monetary terms, such as bringing back diverted money or making the necessary disclosures, the case may be considered for settlement.
Other proposals in the paper
- The time to file a settlement application would increase from 60 days to 90 days from service of the show cause notice or supplementary notice, whichever is later.
- Before issuing a show cause notice, SEBI would send a settlement notice in all cases except where prosecution is proposed, giving 60 days to apply.
- A fast-track route would send matters with a settlement amount of up to Rs 10 lakh from the IC directly to the panel of Whole Time Members, without an HPAC meeting.
- Filing fees would rise from Rs 15,000 to Rs 25,000 for natural persons and from Rs 25,000 to Rs 35,000 for other entities.
- Wilful defaulters, fraudulent borrowers and fugitive economic offenders would not be able to settle.
- Applicants would get a hearing before any settlement order is revoked.
Board approval on 24 September 2026
SEBI's Board approved the new framework at its meeting on 24 September 2026, as recorded in SEBI Press Release No. 59/2026. The approved regulations are titled the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026. They replace the 2018 regulations and take effect 30 days after notification in the Official Gazette. According to the press release text, settlement terms will have three parts: the settlement amount, disgorgement of wrongful gains where applicable, and Remedial and Regulatory Terms, the new name for non-monetary terms. The approved formula is Base Amount x (S + R + G + A - M) plus legal costs, and wrongful gains, loss avoided or loss caused to investors will not be considered in fixing the Base Amount. The Board also approved the pre-show cause settlement notice, the 90-day filing period, a fast-track route for matters up to Rs 10 lakh or disclosure violations, and a one-time 90-day window, with a 20% additional amount, for applications that were rejected earlier.
What noticees and advisers should do
The 2018 regulations continue to apply until the new regulations are notified and take effect. Noticees weighing settlement should work out the likely amount under the new formula, check whether their case involves market-wide impact or diverted funds that could be cured, and keep an eye on the Gazette notification that will start the 30-day clock. The full draft and SEBI's reasoning are in the consultation paper PDF.
Updated on 27 September 2026: added the official SEBI consultation paper and Board press release, the settlement formula and multipliers, the minimum amounts, the new treatment of market-wide impact cases and the Board's approval of the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 on 24 September 2026.
