SEBI proposes cutting settlement amounts for market violations by half under new framework

The Securities and Exchange Board of India (SEBI) on Friday proposed changes to its framework for settling cases involving violations of securities laws, seeking to simplify the process, reduce litigation and speed up resolution of enforcement cases.

The proposal replaces the existing settlement formula with a calculation linked to statutory minimum penalties and factors including the stage of proceedings, previous regulatory action, the gravity of the violation, and aggravating or mitigating circumstances.

Under the proposed framework, the average settlement amount for an infraction would be about four times the regulatory penalty, compared with eight times under the existing formula, SEBI said.

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Reapplication at later stages

SEBI has proposed allowing applicants whose settlement requests have been rejected to reapply at later stages of proceedings, including before a securities tribunal or the Supreme Court.

Such applications would be subject to a 20% additional settlement amount if the reasons for the earlier rejection no longer exist.

The regulator has also proposed limiting non-monetary settlement terms in adjudication cases. Voluntary debarment or suspension could continue to be used in serious cases and for repeat offenders.

In cases involving financial misstatements or diversion of funds, applicants could be required to disclose the allegations to investors and stock exchanges. Settlement terms could also require applicants to restore diverted funds with interest.

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Fast-track settlement route

The draft framework proposes a fast-track settlement route for specified violations and cases involving settlement amounts of up to ₹1 million ($10,479.43).

SEBI has also proposed reducing charges for refiled settlement applications as part of the changes.

The regulator has invited public comments on the proposals until September 4, 2026.