SEBI's new settlement rules: 90-day window, fast-track route and new penalty formula explained

The Securities and Exchange Board of India (SEBI) has approved a new settlement framework that changes how certain administrative and civil proceedings involving securities law violations can be resolved. The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 will replace the existing 2018 regulations and are intended to make the process simpler, more predictable and faster.

Under the new framework, settlement terms will comprise a settlement amount, disgorgement of wrongful gains, where applicable, and remedial and regulatory terms (RRT). RRT was earlier referred to as non-monetary terms.

A major change is the introduction of a new formula for calculating the settlement amount. It will be based on a Base Amount multiplied by factors covering the stage of proceedings, regulatory action, gravity of the violation, aggravating factors and mitigating factors, plus legal costs. The Base Amount will be linked to the minimum penalty prescribed for the violation under securities laws, with multipliers depending on the type of applicant.

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SEBI has also separated wrongful gains, loss avoided or loss caused to investors from the calculation of the Base Amount. Where these amounts can be quantified, they will be disgorged separately. According to SEBI, this is intended to remove the existing double counting of such amounts in settlement calculations.

The revised rules provide a longer window for entities to seek settlement. Before issuing a show-cause notice, SEBI will issue a settlement notice, giving the concerned entity 60 days to file a settlement application. This notice will not be issued where prosecution or an interim order is contemplated. Once a show-cause notice has been served, the period for filing a settlement application will increase from 60 days to 90 days.

For less serious matters, SEBI has introduced a fast-track settlement mechanism. Cases where the settlement amount does not exceed ₹10 lakh, along with specified violations such as certain disclosure-related matters, can qualify for the expedited route.

The regulations will also provide a one-time 90-day window for entities that did not apply earlier, or whose applications were rejected, withdrawn or returned under the 2018 regulations. The facility will cover specified proceedings that remain pending before the Board and will require payment of an additional 20% settlement amount.

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The framework also changes interest on disgorgement. In specified cases, interest will be charged at 9% annually, with a 12% rate applicable after the final order in other matters until the settlement application is filed. No interest will be charged on interest.

The 2026 regulations will come into force the day after 30 days from their notification.