The revised settlement framework of the Securities and Exchange Board of India (SEBI) draws a clearer line between the cost of closing a regulatory case and the obligation to return wrongful gains or make good investor losses, with the final financial liability also depending on how far the proceedings have progressed, said experts.
The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, notified in the Gazette last week, prescribe the terms of settlement, the calculation methodology and the treatment of amounts payable in different circumstances. The regulations replace the 2018 settlement framework.
Pranav Bhaskar, Senior Partner at SKV Law Offices, said the revised methodology requires “a detailed, transaction-specific computation”. The framework separates the settlement amount from disgorgement, where applicable, rather than treating both as a single component.
This distinction matters when determining the financial consequences of alleged misconduct. Under the new regulations, settlement terms can include the settlement amount, disgorgement of wrongful gains, losses averted or losses caused to investors, and remedial or regulatory requirements, as applicable.
“The revised methodology certainly gives an applicant greater clarity at the outset as to the likely financial implication of settlement,” Siddharth Batra, Advocate on Record at the Supreme Court of India, said.
The regulations also prescribe stage-based factors for calculating the settlement amount. The factor is 0.20 for voluntary, suo motu applications, 0.40 before the issuance of a show-cause notice and 0.60 after its issuance.
The framework also introduces a 60-day period for applicants seeking settlement before a show-cause notice is issued. “The 60-day non-extendable period introduces certainty and discipline,” Batra said.
Tushar Kumar, Advocate at the Supreme Court of India, said a clearly articulated methodology could help applicants assess their potential financial exposure and make more informed decisions at an earlier stage. He said the additional monetary component for refiling a settlement application at the same stage as “a balanced approach”.
The regulations allow an applicant to refile an application at the same stage of proceedings, subject to an additional payment of 20 per cent of the settlement amount, as prescribed under the framework.
The treatment of money recovered is another distinction, with settlement amounts being credited to the Consolidated Fund of India, while disgorgement and applicable interest are credited to SEBI’s Investor Protection and Education Fund.