New Delhi: SEBI, the statutory regulator for markets, has notified new regulations that provide a revised formula for calculating settlement amounts and a fast-track route for cases involving settlement amounts of up to Rs 10 lakh. The new framework separately provides for disgorgement of wrongful gains, loss avoided, or loss caused to investors, removing the existing double counting of such amounts when calculating settlement terms.
Under the new framework, settlement terms will comprise the settlement amount, disgorgement of wrongful gains, wherever applicable, and remedial and regulatory terms (RRT), earlier referred to as non-monetary terms, according to a notification dated October 6. The new formula for calculating the settlement amount will be based on a base amount linked to the minimum penalty prescribed for the violation under securities laws. The base amount will be adjusted using factors related to the stage of proceedings, regulatory action, gravity of the violation, aggravating factors and mitigating factors, besides legal costs.
SEBI said wrongful gains, losses avoided or losses caused to investors will not be included while determining the base amount. Such amounts, where quantified, will instead be disgorged separately. This removes the existing double counting of such amounts when computing settlement terms.
The regulator has also introduced a fast-track settlement route based on both monetary thresholds and the nature of violations, including certain disclosure-related violations.
"Fast track settlement shall be of two types- violation-based fast track settlement and monetary threshold-based fast track settlement," SEBI said in its notification.
Under the monetary threshold-based route, cases where the settlement amount does not exceed Rs 10 lakh will move directly from the internal committee to a panel of whole-time members.
For violation-based fast-track settlements, SEBI will issue a notice offering the entity an opportunity to settle the matter by paying the amount specified in the notice. The settlement order will be passed by the panel of members after payment of the settlement amount.
The regulations also provide for settlement of cases involving misrepresentation of financial statements or diversion of funds, subject to appropriate remedial and regulatory measures, including disclosures and bringing back diverted funds.
The Settlement Regulations, 2026 are expected to make the settlement framework simpler, less discretionary, easier to understand, more predictable and also fast-track less serious matters while ensuring that settlement continues to serve as an effective resolution mechanism with an appropriate deterrent against violators of securities laws. This followed after the board of SEBI approved new rules in its meeting last month.