Sebi to revamp settlement rules, curb penalties

India’s capital markets regulator has initiated a review of its rules on case settlement to simplify calculations and address concerns on stringent conditions and inflated penalties, three people familiar with the matter said.

- Apoorva Ajith & Neha Joshi

The goal of the Securities and Exchange Board of India (Sebi) goal is to simplify, expedite and make the process more accessible by allowing parties to voluntarily settle cases rather than await regulatory action, the people said, citing the regulator's meetings with law firms and market participants held earlier this month to seek feedback.

Sebi is expected to release a consultation paper on this by the end of the year, the people said, speaking on condition of anonymity about the regulatory process.

The review could ease the process for pending settlement applications. According to Sebi’s annual report, these rose to 703 in FY25 from 434 in FY24 and 386 in FY23.

According to the people cited earlier, lawyers said at the meeting with the regulator that Sebi’s approach of adding base amounts for every charge, even for a single violation, sharply raised overall settlement costs. Many also criticized the inclusion of unrelated base values, arguing that they artificially inflated the total amount.

Another concern: the internal committee often imposed non-monetary conditions like market bans, even when the original notice mentioned only monetary penalties. Lawyers said this was beyond the committee's scope.