Mumbai: SEBI’s planned overhaul of settlement rules could accelerate the recovery of diverted funds and improve shareholder protection, according to regulatory officials and legal experts.
The regulator’s board approved the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, last week. The framework aims to resolve cases involving financial misrepresentation and siphoning of money without lengthy litigation.
The regulations are awaiting notification and will take effect 30 days after they are notified.
Recovery First
SEBI Chairman Tuhin Kanta Pandey said protecting investors would involve more than collecting a settlement amount.
Where money has been siphoned off, its return must come first, he said, describing this requirement as non-negotiable.
Disgorgement, which involves recovering wrongful gains, and Remedial and Regulatory Terms (RRT) would also form part of settlements wherever applicable.
The framework therefore treats the settlement payment separately from the recovery of wrongful gains and other corrective requirements.
Defined Formula
Settlement amounts will be calculated using a defined formula. Pandey said the amount would be linked to a multiple of the penalty.
The changes also provide for fast-track settlements in certain cases and broader access to the settlement mechanism.
Settling a case does not constitute an admission or denial of guilt. However, the company or individual concerned would face a financial impact, while SEBI could conclude proceedings more quickly.
Application Window
Under the new process, SEBI will issue a settlement notice before sending a show-cause notice.
Recipients will have 60 days to submit an application for settlement, giving them an opportunity to seek resolution at an earlier stage.
Disclosure Question
The revised process also raises questions about disclosures by listed companies.
SEBI whole-time member Kamlesh Chandra Varshney said receiving a show-cause notice requires disclosure. A settlement notice, however, may not automatically trigger the same obligation.
He said SEBI would examine this aspect. The disclosure treatment of settlement notices therefore remains a matter for further examination as the regulator prepares to implement the framework.
