New Delhi, 10 October (H.S.): The Securities and Exchange Board of India (SEBI), the country’s capital markets regulator, has introduced new settlement rules to expedite the resolution of stock market disputes and cases involving regulatory violations. In a major overhaul of its settlement framework, the regulator has notified the SEBI (Settlement Proceedings) Regulations, 2026.
Under the new framework, SEBI has introduced a dedicated fast-track mechanism to facilitate the swift resolution of smaller cases involving settlement amounts of less than Rs 10 lakh. The revised rules also establish a transparent formula for determining settlement amounts, making the process more predictable, consistent and efficient.
A key feature of the new framework is the separation of settlement calculations from the recovery of unlawful gains and losses suffered by investors. Under the earlier system, similar amounts representing losses or wrongful gains could sometimes be counted twice, complicating the calculation process. The revised framework eliminates this issue of double counting by providing for distinct treatment of the core settlement amount, recovery of unlawful gains and corrective measures.
The new formula developed by SEBI will be based on a “base amount”, determined by reference to the minimum penalty prescribed for the relevant violation under the applicable law. The final settlement amount will then be calculated after taking into account several factors, including the seriousness of the violation, the stage of the investigation, regulatory action taken, the entity’s conduct in facilitating or obstructing the proceedings, and the legal costs involved.
SEBI has clarified that unlawful gains and losses suffered by investors will not be included in the calculation of the base amount. Instead, these sums will be assessed separately and recovered in full, ensuring that the settlement calculation remains distinct from the recovery of amounts arising from the violation.
Two-Pronged Fast-Track Mechanism to Expedite Settlements
The new fast-track mechanism, designed to accelerate dispute resolution, has been divided into two categories: one based on the nature of the violation and the other on the monetary threshold involved.
Under the monetary threshold-based route, cases involving settlement amounts of less than Rs 10 lakh will be referred directly from the internal committee to a panel of whole-time members of SEBI for expedited decision-making.
Under the violation-based fast-track route, SEBI will issue a notice to the concerned entity and offer it an opportunity to settle the matter promptly by paying a prescribed amount. The mechanism is intended to reduce procedural delays and facilitate the quicker disposal of eligible cases.
Settlement Option Extended to Financial Statement Manipulation and Fund Diversion
The revised regulations also provide for settlement in certain serious cases involving irregularities in financial statements and the diversion or misappropriation of funds. However, the option will be subject to stringent conditions.
Companies seeking to settle such cases will be required to make full public disclosures and return the entire amount of misappropriated funds to the financial system. These safeguards are intended to ensure accountability while allowing eligible cases to be resolved without prolonged proceedings.
SEBI expects the new regulations, approved at its board meeting last month, to significantly reduce the time required to resolve market-related disputes. The revised framework is also expected to limit discretionary decision-making by regulatory officials, improve transparency in determining settlement amounts and strengthen deterrence against violations of securities market laws.
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Hindusthan Samachar / Jun Sarkar
