Sebi begins revamp of settlement rules, curb inflated penalties

Although there is a formula to calculate settlements (including base amounts, conversion and regulatory action factors), Sebi can still impose larger amounts at its discretion.

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The regulator’s multi-tiered process includes an internal committee of senior officials, an advisory panel with retired judges and market specialists, and final approval by Sebi’s whole-time members.

Lawyers said large settlement sums often discourage applicants, and that some parties prefer to seek interim relief or face adjudication rather than opt for settlement, given the large amounts sought.

“The settlement framework may require greater balance. There appears to be a misalignment between the scale of the settlement amount proposed and the corresponding penalties imposed later,” said Abhiraj Arora, former Sebi officer and partner at Saraf and Partners, a law firm.