The Securities and Exchange Board of India has proposed significant changes to its settlement framework, including scrapping the additional 20% settlement charge currently imposed when multiple enforcement proceedings involving the same noticees are settled together. According to the consultation paper, this change aims to make settlement more attractive while maintaining deterrence. The proposed framework would link settlement amounts to the minimum penalty prescribed under securities laws, with different multipliers based on the applicant's category, excluding wrongful gains or investor losses from the base amount but continuing to recover them separately through disgorgement. As reported by Mint, these proposals are open for public consultation and aim to reduce case backlogs, make the settlement process more transparent, and lower the financial burden on smaller market participants.
Under the proposed fast-track mechanism, settlement cases involving amounts up to ₹10 lakh would not require a meeting of the High Powered Advisory Committee (HPAC). Such cases would move directly from the Internal Committee to a panel of Whole Time Members, as reported by NDTV Profit. The existing summary settlement process for specified violations would also be retained as part of this fast-track framework. Once the applicant makes the required payment, the settlement order would be passed by the competent authority before whom the proceedings are pending, or by the panel of Whole Time Members if no proceedings are pending. According to Mint, settling a SEBI case is NOT an admission of guilt — it closes the matter without a conviction, protecting your ability to trade and invest freely in the future.
The regulator has proposed increasing the maximum number of mitigating factors from three to five, adding factors such as a change in control or management of a corporate entity and the applicant being an independent director. According to the consultation paper, multiple failures to make event-based disclosures arising from a single event would be treated as one count of default. The proposal also introduces clearer rules for calculating the number of defaults, with the base amount calculated for each count of default and then aggregated, instead of being calculated separately for every provision of law alleged to have been violated. As reported by Mint, avoiding ignoring SEBI communications and settling early under the proposed framework could save you the 20% additional charge that currently applies to multiple proceedings.
For cases involving multiple transactions, Sebi has proposed using a weighted average for each year and charging interest from the middle of the year where calculating interest from each transaction date is complex. The regulator has also proposed increasing the time available for filing settlement applications in pending proceedings, noting that the current 60-day period may be inadequate for corporates and entities based outside India due to their organisational structure or overseas presence. On interest payable on disgorgement, Sebi has proposed charging 9% per annum from the date of the transaction until the filing of the settlement application where no final order has been passed, and 12% thereafter until the settlement application is filed. According to Mint, these changes could save you more than 6 months of additional charges that currently apply to multiple proceedings.
The proposed changes are part of a consultation paper seeking to replace the existing Sebi (Settlement Proceedings) Regulations, 2018, with a new framework aimed at making settlement of enforcement proceedings simpler, faster and more predictable. According to NDTV Profit, the proposals follow consultations with stakeholders and a review of settlement applications filed over the last two years. Sebi has sought public comments until September 4 on the proposals, with the regulator's study finding that in cases where settlement was rejected or withdrawn and enforcement proceedings subsequently resulted in penalties, the settlement amounts proposed were, on average, about eight times the penalties finally imposed. As reported by Mint, the proposals aim to make resolving market violations quicker and cheaper for ordinary investors, with the new fast-track route potentially applying to cases with pending SEBI notices or show-cause orders once rules are finalised.
