By Lakshay Jain, Director, Operations, ICFM India | Updated: 10 October 2026
Quick answer: The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, approved by SEBI’s board on 24 September 2026, replace the 2018 settlement rules. They calculate the settlement amount with a fixed formula, disgorge wrongful gains separately, add a settlement notice before a show cause notice, and create fast-track routes, including one for settlement amounts up to ₹10 lakh.
Settling a case with SEBI has long meant negotiating against a number you could not fully predict. Entities with similar violations could end up with very different terms. The Settlement Regulations, 2026 are SEBI’s attempt to change that.
The new rules tie the settlement amount to a formula, recover wrongful gains separately so they are not counted twice, and open two fast-track routes for eligible cases. If your company, your firm or your clients could ever face a SEBI proceeding, here is how the new calculation works, where the ₹10 lakh threshold applies and where it does not, and what the changes mean in practice.
Primary source: SEBI press release PR No. 59/2026, key decisions of the board meeting dated 24 September 2026. Also based on Mint’s report (ADD MINT LINK). The gazette notification on sebi.gov.in is the binding text.
Key Takeaways
- SEBI’s board approved the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 on 24 September 2026. They replace the 2018 regulations and take effect on the day after the 30th day from notification.
- The settlement amount now follows a published formula: Base Amount × (S + R + G + A − M) + Legal Costs. The base amount is linked to the minimum penalty for the violation.
- S, R, G, A and M stand for the stage of proceedings, regulatory action, gravity, aggravating factors and mitigating factors.
- Wrongful gains, losses avoided and losses caused to investors are excluded from the base amount. Where quantified, they are disgorged separately, ending the earlier double counting. Interest on disgorgement runs at 9% a year, and 12% in some later-stage cases.
- Settlement terms now have three parts: the settlement amount, disgorgement, and remedial and regulatory terms (RRT), the new name for non-monetary terms.
- Cases with a settlement amount of up to ₹10 lakh can move directly from SEBI’s internal committee to a panel of whole-time members. This is a faster route, not an exemption.
- A violation-based fast-track covers matters such as disclosure violations: SEBI states the amount in a notice, and the order follows payment.
- SEBI will issue a settlement notice before a show cause notice, giving 60 days to apply. The window to apply after a show cause notice rises from 60 to 90 days.
- A one-time 90-day window opens on commencement for eligible pending matters, at an additional 20% settlement amount.
- Cases involving misrepresentation of financial statements or diversion of funds can be settled, subject to RRT such as disclosures and bringing diverted funds back.
What are the SEBI Settlement Regulations, 2026?
The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, referred to as the Settlement Regulations, 2026, are SEBI’s revised rules for resolving securities law proceedings through settlement instead of a full adjudication. They replace the SEBI (Settlement Proceedings) Regulations, 2018. They change two things: how the settlement amount is calculated, and the procedure an eligible case follows to reach a settlement order.
Why did SEBI change the settlement framework?
SEBI’s stated objective is to simplify the framework and reduce the scope for inconsistent or unpredictable outcomes. When the factors behind a settlement amount are not spelt out, entities with similar violations can face very different terms, and neither can easily judge whether settling is worth it.
SEBI’s own figures show why. Its consultation paper of 14 August 2026 recorded that settlement collections fell to ₹109.8 crore in FY26 from ₹798.9 crore in FY25, and settlement applications fell from 703 to 439 over the same period. A study of the preceding two years found that, where settlement failed and the case went to adjudication, the proposed settlement amount averaged roughly eight times the penalty finally imposed. SEBI estimated the revised method could bring that gap down to about four times (King Stubb & Kasiva summary of the consultation paper).
By naming the factors that drive the amount, SEBI aims to make the process easier to understand and more predictable. That gives an entity a firmer basis for the central decision in any proceeding: settle or contest.
Click NowDoes the new formula make every outcome predictable?
No. The final amount still depends on the circumstances of the case and the applicable regulatory framework. The formula narrows the room for surprises. It does not turn settlement into a fixed price list.
When do the SEBI Settlement Regulations 2026 come into force?
The regulations take effect on the day after the 30th day from the date of their notification in the official gazette. Until then, the 2018 regulations apply.
| Date | Milestone |
|---|---|
| 14 August 2026 | SEBI publishes the consultation paper and draft regulations |
| 4 September 2026 | Public comment window closes |
| 24 September 2026 | SEBI’s 215th board meeting approves the regulations (PR No. 59/2026) |
| Notification date | Check the gazette notification on sebi.gov.in |
| Day after the 30th day from notification | Regulations come into force |
| 90 days from commencement | One-time settlement window for eligible pending matters closes |
How is the SEBI settlement amount calculated under the 2026 rules?
The calculation starts with a base amount linked to the minimum penalty prescribed for the relevant violation under securities laws. SEBI then adjusts that base for these factors:
- Stage of proceedings: how far the matter has progressed when settlement is sought.
- Regulatory action: the regulatory action involved in the case.
- Gravity of the violation: how serious the breach is.
- Aggravating and mitigating circumstances: facts that push the amount up or bring it down.
- Legal costs.
SEBI’s board press release sets out the formula:
Settlement Amount = BA × (S + R + G + A − M) + Legal Costs
BA is the base amount, linked to the minimum penalty for the violation, with multipliers based on the type of applicant. S is the stage of proceedings, R the regulatory action factor, G the gravity factor based on the nature of the default, A the aggravating factors and M the mitigating factors. The values assigned to each factor are set in the regulations.
Two points stand out. First, anchoring to the statutory minimum penalty gives every calculation the same reference point. Second, the stage of proceedings is a named factor, so timing becomes part of the cost conversation for any entity weighing settlement.
Illustrative example: base amount plus adjustments
Illustrative only. The formula structure below is SEBI’s. The penalty figure, the factor values, the legal costs and the dates are hypothetical, chosen to show the logic. They are not SEBI’s values.
Assume an entity faces proceedings pending before SEBI for a violation with a base amount of ₹1,00,000. It also made a quantifiable wrongful gain of ₹3,00,000, two years before it files its settlement application.
| Step | Element | Hypothetical value | Amount (₹) |
|---|---|---|---|
| 1 | Base amount (BA), linked to minimum penalty | Starting point | 1,00,000 |
| 2 | S, stage of proceedings | 1.0 | |
| 3 | R, regulatory action factor | 0.5 | |
| 4 | G, gravity factor | 1.5 | |
| 5 | A, aggravating factors | 0.5 | |
| 6 | M, mitigating factors (subtracted) | 0.5 | |
| 7 | Factor total: S + R + G + A − M | 3.0 | |
| 8 | BA × factor total | 3,00,000 | |
| 9 | Legal costs | Fixed sum | +25,000 |
| Settlement amount | 3,25,000 | ||
| Disgorgement of wrongful gain (separate) | Quantified gain | 3,00,000 | |
| Interest on disgorgement at 9% a year for 2 years | Simple interest | 54,000 |
What the example shows:
- The ₹3,00,000 gain sits outside the settlement amount. It is recovered once, through disgorgement with interest, instead of also inflating the formula.
- Mitigation moves the whole multiplier. Here, every 0.5 of mitigating factors cuts ₹50,000 from the settlement amount, which is why documenting genuine mitigating facts matters.
- Each factor can be checked separately, so an entity can contest one element without reopening the whole number.
- At ₹3,25,000, the settlement amount in this illustration falls under ₹10 lakh, so the monetary fast-track route could become relevant. Eligibility still depends on the conditions in the regulations.
Why does SEBI compliance knowledge matter before a proceeding starts?
Every line in the example above depends on facts a firm has to establish: what happened, at what stage, how serious it was, and what mitigates it. Answering those questions well depends on people who understood the rules before anything went wrong.
That is the gap ICFM India works on. Since 2012, ICFM India has trained market professionals in Delhi and prepared them for NISM certification exams, the qualifications SEBI requires for a range of roles at market intermediaries. For dealers, back-office staff and compliance teams, that grounding is the practical safeguard against ending up in a proceeding at all.
If you are already facing a live SEBI matter, speak to a qualified securities lawyer first.
Next step: Explore ICFM India’s NISM preparation and market courses Click Now
How does SEBI now treat wrongful gains and losses?
Wrongful gains, losses avoided and losses caused to investors are no longer part of the base settlement amount. Where these amounts can be quantified, SEBI recovers them separately through disgorgement.
Under the earlier approach, as described in the notification, these amounts could be counted while calculating settlement terms. That created a risk of double counting. The 2026 framework removes the overlap.
Old vs new treatment of wrongful gains
| Aspect | Earlier approach | Settlement Regulations, 2026 |
|---|---|---|
| Wrongful gains, losses avoided, losses caused to investors | Could be counted while calculating settlement terms | Excluded from the base settlement amount |
| How these amounts are recovered | Within the settlement terms | Disgorged separately, where quantified |
| Double counting | Possible | Removed |
| What the settlement amount reflects | The violation, plus gains that might also be recovered elsewhere | The violation-linked formula only |
Why the separation matters
It makes each number easier to test. The settlement amount can be checked against the formula factors. The disgorgement figure can be checked against the actual gain made or loss caused. One is a regulatory charge for the violation; the other recovers money that should not have been made or kept.
Disgorgement applies only where these amounts are applicable and can be quantified, so it will not arise in every settlement.
Is interest charged on disgorgement?
Yes. For proceedings pending before SEBI, interest runs at 9% a year from the date of the violation until the settlement application is filed. For other matters, it runs at 9% a year until the final order and 12% a year after that until the application is filed. No interest is charged on interest. Because interest accrues with time, an entity that delays filing pays more on any disgorged amount.
How do the SEBI fast-track settlement routes work?
The regulations create two separate fast-track mechanisms. One turns on the size of the settlement amount. The other turns on the nature of the violation.
The ₹10 lakh monetary threshold route
Where the settlement amount does not exceed ₹10 lakh, an eligible case moves directly from the internal committee to a panel of SEBI’s whole-time members. The aim is to resolve smaller matters faster by shortening the approval process.
The violation-based route
SEBI issues a notice giving the entity an opportunity to settle by paying the amount specified in that notice. Once the amount is paid, a panel of SEBI members passes the settlement order. This route depends on the nature of the violation, not only on the size of the amount. The source news refers to certain disclosure-related violations in the context of fast-track settlements; the regulation defines which categories qualify.
Monetary vs violation-based fast-track: side by side
| Aspect | Monetary threshold route | Violation-based route |
|---|---|---|
| Basis | Settlement amount of ₹10 lakh or less | Nature of the violation |
| How the amount is set | Calculated under the revised formula | Specified in SEBI’s notice |
| Path to the order | Internal committee, then directly to a panel of whole-time members | Entity pays the notified amount, then a panel of SEBI members passes the order |
| Key caution | Not a blanket exemption or an automatic right to settle | Process depends on the violation category and applicable requirements |
Is the ₹10 lakh limit an exemption?
No. The threshold relates only to the settlement amount under this route. It is not an exemption from securities laws, and it does not create an automatic right to settle every violation below ₹10 lakh. The route works inside the framework SEBI has prescribed.
What other changes widen access to settlement?
| Change | What it means |
|---|---|
| Settlement notice before a show cause notice | SEBI issues a settlement notice before a show cause notice, giving 60 days to file a settlement application. It is not issued where prosecution or an interim order is contemplated. |
| Longer filing window after a show cause notice | The time to file a settlement application after a show cause notice rises from 60 days to 90 days. |
| One-time 90-day window | Opens on commencement for entities that did not apply earlier, or whose applications were rejected, withdrawn or returned under the 2018 regulations. It covers specified proceedings still pending before SEBI, at an additional 20% settlement amount. |
| Settlement at the appellate stage | Applications rejected earlier may be considered at the appellate stage if the grounds for rejection no longer apply, also at an additional 20% settlement amount. |
What are the three components of SEBI settlement terms?
The 2026 regulations set out settlement terms in three parts.
| Component | What it covers | What changed |
|---|---|---|
| Settlement amount | The amount calculated under the revised formula | Anchored to the minimum statutory penalty, with named adjustment factors |
| Disgorgement | Recovery of wrongful gains, losses avoided or losses caused to investors | Separated from the settlement amount; applies where applicable and quantified |
| Remedial and regulatory terms (RRT) | Measures the entity must undertake as part of the settlement | Renamed from “non-monetary terms” |
What are remedial and regulatory terms (RRT)?
RRT are the actions an entity must take as part of a settlement, beyond paying money. They were earlier called non-monetary terms. The new name reflects their purpose: addressing the regulatory concerns raised by the violation.
For a compliance team, the rename is a useful signal. A settlement may include corrective work that needs an owner, a budget and a timeline, alongside the payment.
RRT will ordinarily not be imposed when settling adjudication proceedings, because those proceedings only contemplate monetary penalties. Quantified wrongful gains are still disgorged in such cases, and disclosures may be required for disclosure-related violations.
Can cases involving misrepresentation or diversion of funds be settled?
Yes, with conditions. The 2026 regulations allow settlement of cases involving misrepresentation of financial statements or diversion of funds, subject to appropriate remedial and regulatory measures. These may include making the necessary disclosures and bringing diverted funds back.
This is where RRT carries real weight. In these cases, settlement does not mean paying an amount and closing the file. The underlying problem, whether incorrect financial information in the market or money moved out of the company, has to be addressed as part of the terms. The process remains subject to the conditions and safeguards SEBI has prescribed.
For shareholders of an affected company, that is the part to watch. A settlement in these matters is built around corrective action, such as corrected disclosures or restored funds.
What do companies, investors and compliance teams gain from the 2026 rules?
The rules give each group something concrete to work with: a clearer number, a clearer process, or a clearer view of outcomes.
For a company or intermediary facing a SEBI proceeding
- Know your anchor. The base amount is tied to the minimum penalty for the violation, so your legal team can identify the starting point before discussions begin.
- Work the factors. Stage of proceedings, gravity, and aggravating and mitigating circumstances all move the amount. Documenting genuine mitigating facts early gives the internal committee something specific to weigh.
- Budget for all three components. The settlement amount, any quantified disgorgement and the RRT obligations each need internal sign-off.
- Check fast-track eligibility. If the settlement amount is likely to be ₹10 lakh or less, or SEBI issues a violation-based notice, the route to a settlement order is shorter.
For investors
- Settlement amounts are intended to become more consistent across similar cases, which makes SEBI’s enforcement outcomes easier to read.
- A settlement can now show disgorgement as a distinct component, separate from the settlement amount.
- In fund diversion and misstatement cases, settlement is tied to remedial measures, so look for disclosures and fund restoration in the terms.
For compliance teams
- Treat RRT as a work plan. The rename from non-monetary terms underlines that corrective measures are part of the settlement.
- Keep records that support the numbers. Clear records of what happened, and of any gain made or loss avoided, help with both the formula factors and the disgorgement figure.
- Track the official text. Eligibility conditions, procedure and the effective date sit in the SEBI notification, not in news summaries.
What should you do next?
- Read the official text. Download the SEBI notification of the Settlement Regulations, 2026 from sebi.gov.in. This article summarises the reported changes and is not a substitute for the regulation or for legal advice.
- Map open matters. For any pending or likely proceeding, note the violation, its minimum prescribed penalty, the current stage, any quantifiable gain or loss, and whether the one-time 90-day window could apply once the regulations commence.
- Assess the route. Check whether the expected settlement amount or the nature of the violation could qualify for a fast-track route.
- Plan for RRT. List the disclosures, process fixes or fund restoration a settlement might require, and who would own each.
- Take qualified advice. Settlement decisions carry legal consequences. Work with a securities lawyer on any live matter.
Sources: SEBI press release PR No. 59/2026, key decisions of the board meeting dated 24 September 2026; King Stubb & Kasiva summary of SEBI’s 14 August 2026 consultation paper. Check the official SEBI gazette notification for the binding text.
Disclaimer: This article is for educational purposes only and is not legal, financial or investment advice. The worked example is hypothetical. The official SEBI notification is the binding text. If you face SEBI proceedings, consult a qualified securities lawyer. ICFM India is a training institute, not a law firm.
Frequently asked questions
What are the SEBI Settlement Regulations 2026?
The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 replace SEBI’s 2018 settlement rules. Approved by SEBI’s board on 24 September 2026, they link the settlement amount to the minimum statutory penalty through a fixed formula, disgorge wrongful gains separately, and add a settlement notice and fast-track routes, including one for amounts up to ₹10 lakh.
How is the SEBI settlement amount calculated in 2026?
SEBI uses the formula Settlement Amount = Base Amount × (S + R + G + A - M) + Legal Costs. The base amount is linked to the minimum penalty for the violation. S, R, G, A and M stand for stage of proceedings, regulatory action, gravity, aggravating factors and mitigating factors respectively.
What is the ₹10 lakh fast-track settlement route under SEBI?
It is a fast-track mechanism for cases where the settlement amount does not exceed ₹10 lakh. Eligible cases move directly from SEBI’s internal committee to a panel of whole-time members, shortening the approval process. The threshold relates to the settlement amount and is not a blanket exemption or automatic right to settle.
Is the SEBI ₹10 lakh settlement limit an exemption from penalties?
No. The ₹10 lakh figure is a ceiling on the settlement amount for the monetary threshold fast-track route. It is not an exemption from securities laws and does not give an automatic right to settle every violation below that amount. The route works within the conditions SEBI has prescribed under the regulations.
What is the violation-based fast-track settlement in SEBI?
It is a separate fast-track route based on the nature of the violation rather than only the settlement amount. SEBI issues a notice offering the entity a chance to settle by paying the amount specified. Once the amount is paid, a panel of SEBI members passes the settlement order.
What is disgorgement in a SEBI settlement?
Disgorgement is the recovery of wrongful gains, losses avoided or losses caused to investors. Under the 2026 regulations, these amounts are excluded from the base settlement amount and, where they can be quantified, are disgorged separately. This removes the double counting that could occur when they also fed into settlement terms.
What are remedial and regulatory terms (RRT) in SEBI settlement?
Remedial and regulatory terms are the measures an entity must undertake as part of a settlement, alongside any payment. They were previously called non-monetary terms. The new name reflects their role in addressing the regulatory concerns arising from a violation, such as making disclosures or bringing diverted funds back.
Can a company settle a SEBI case for diversion of funds?
Yes, the 2026 regulations allow cases involving diversion of funds or misrepresentation of financial statements to be settled, subject to appropriate remedial and regulatory measures. These may include making the necessary disclosures and bringing diverted funds back. Settlement is conditional and does not mean simply paying an amount and closing the matter.
When will the SEBI Settlement Regulations 2026 come into force?
SEBI’s board approved the regulations on 24 September 2026. They come into force on the day after the 30th day from the date of their notification. Until then, the SEBI (Settlement Proceedings) Regulations, 2018 continue to apply. Check sebi.gov.in for the notification date that starts this 30-day count.
Why did SEBI change its settlement regulations?
SEBI’s stated aim is to simplify the settlement framework and reduce the scope for inconsistent or unpredictable outcomes. By linking the amount to minimum statutory penalties and naming the factors that adjust it, SEBI wants the process to be easier to understand and more predictable for entities considering settlement.
