SEBI settlement regulations, 2026: What has changed from the earlier framework

October 15, 2026

SEBI has notified the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, replacing the SEBI (Settlement Proceedings) Regulations, 2018, with effect from 07^th November 2026. The new framework introduces changes in eligibility, application timelines, settlement calculations, fast-track settlement and the treatment of rejected and pending applications.

The key changes from the earlier framework are discussed below.

1. Scope and eligibility for settlement

Revised eligibility criteria (Regulation 6): Under the 2018 framework, SEBI had discretion to decline settlement where the applicant was a wilful defaulter or fugitive economic offender. Under the 2026 framework, settlement is expressly prohibited where the applicant is a wilful defaulter, fraudulent borrower or fugitive economic offender. Thus, fraudulent borrowers have been added, and the earlier discretionary restriction has become mandatory.
Settlement of serious violations (Regulations 6 and 18): Under the 2018 framework, SEBI had discretion to decline settlement where the alleged violation had a market-wide impact, caused losses to a large number of investors or affected market integrity. Under the 2026 framework, this discretion continues, but Regulation 18(2) expressly allows SEBI to consider settlement where appropriate monetary and remedial conditions can adequately address the consequences of the violation.

2. Application process and timelines

Pre-SCN settlement opportunity (Regulation 5): Under the 2018 framework, the general settlement notice mechanism had been omitted in 2020. The 2026 framework reintroduces this mechanism and requires SEBI to issue a settlement notice before issuing a show cause notice (SCN), allowing the recipient 60 days to apply for settlement. This does not apply where interim directions or prosecution are contemplated or where the matter is covered under Regulation 27.
Extended application period (Regulation 4): Under the 2018 framework, an applicant had 60 days from receipt of an SCN or subsequent supplementary SCN, whichever was later, to apply for settlement. The 2026 framework extends this period to 90 days. However, where an appeal is pending before SAT or the Supreme Court, an applicant may seek settlement even after expiry of the 90-day period, subject to the other provisions of the Regulations.
Revised application requirements (Regulation 3): Under the 2018 framework, an application was accompanied by the prescribed form, undertakings, waivers and application fee. Under the 2026 framework, the applicant is additionally required to submit the prescribed basis of computation of the settlement amount.
Increase in application fees (Regulation 3): Under the 2018 framework, the non-refundable application fee was ₹15,000 other than body corporates and ₹25,000 for bodies corporate. Under the 2026 framework, the fee has increased to ₹25,000 for natural persons and ₹35,000 for other applicants.
Treatment of incomplete applications (Regulation 3(7) and 7(5)): Under the 2018 framework, applicants had 15 days to rectify an incomplete application, failing which a fresh application for the same default was not permitted at the same stage of proceedings. The 2026 framework retains the 15-day period but treats an application not rectified within this period as withdrawn. Such applicants may reapply at the same or a subsequent stage, subject to an additional 20% settlement amount subject to regulation 7(5).
Relaxation of timelines (Regulation 42): Under the 2018 framework was not elaborate enough with respect to extensions of various procedural timelines. The 2026 framework introduces a separate power allowing the Panel of Whole-Time Members to relax certain procedural timelines where the delay occurred due to circumstances beyond the applicant’s control. The relaxation is subject to the prescribed conditions and does not extend the initial 60-day pre-SCN or 90-day post-SCN application periods. For delayed payment, an extension of up to 30 days may be permitted with an additional amount of up to 1%.

3. Changes in the settlement procedure

Role of the Internal Committee (Regulation 22): Under the 2018 framework, the Internal Committee examined settlement applications and determined proposed settlement terms. The 2026 framework, under Regulation 22(2), expressly permits the Internal Committee to consider the powers and discretion available to the Panel of Whole-Time Members while recommending settlement terms. However, the authority to exercise powers specifically reserved for the Panel continues to rest with the Panel.
Submission of revised settlement terms (Regulation 22): Under the 2018 framework, applicants could submit revised settlement terms within a maximum of 15 working days from the Internal Committee meeting. Under the 2026 framework, the period is up to 21 calendar days.
Demand notice and payment (Regulation 25): Under the 2018 framework, the demand notice was required to be issued within seven working days of the Panel’s decision. The 2026 framework prescribes ten calendar days. The ordinary period of 30 calendar days for payment from receipt of the demand notice continues, subject to the limited relaxation available under Regulation 42.

4. Two types of fast-track settlement

Violation-based fast-track settlement (Regulation 27): Under the 2018 framework, Regulations 16 and 17 provided a summary-settlement mechanism for specified violations, including delayed disclosures and compliance defaults. The 2026 framework continues this mechanism as violation-based fast-track settlement. SEBI may issue a fast-track notice requiring the recipient to apply for settlement, pay the specified amount and comply with or undertake the prescribed conditions within 30 days, extendable by up to 15 days for recorded reasons. The mechanism follows a special notice-based procedure without ordinary HPAC consideration.
Monetary threshold-based fast-track settlement (Regulation 28): The 2018 framework did not provide a separate fast-track mechanism based on a ₹10 lakh settlement threshold. The 2026 framework introduces this route where the Internal Committee determines that the settlement amount does not exceed ₹10 lakh and the matter does not involve disgorgement or remedial and regulatory terms. In such cases, the application may proceed directly from the Internal Committee to the Panel of Whole-Time Members without HPAC consideration.
Failure to avail fast-track settlement (Regulation 29): Under the 2018 framework, failure to avail summary settlement restricted the applicant’s ability to seek settlement at the same stage. The 2026 framework expressly provides that where the requirements of fast-track settlement are not fulfilled, SEBI may initiate or continue proceedings, and settlement may subsequently be sought only at a later prescribed stage.

5. Calculation and terms of settlement

Revised settlement calculation (Regulations 10–16): Under the 2018 framework, the settlement amount was determined through an indicative amount calculated under Schedule II, using prescribed factors and benchmark amounts. The 2026 framework introduces a revised formula based on the statutory minimum penalty and factors relating to the stage of proceedings, regulatory action, gravity, aggravating circumstances and mitigating circumstances.
Applicant-based multipliers (Regulation 11): Under the 2018 framework, the base amount was the higher of the prescribed violation-specific benchmark amount or the sum of illegal profits and losses caused to investors, as applicable. The 2026 framework replaces this approach with a base amount calculated using the applicable statutory minimum penalty multiplied by an applicant-specific factor, ranging from 2 for independent directors to 5.5 for market infrastructure institutions. While investor losses no longer directly determine the base amount under this formula, disgorgement of wrongful gains, losses avoided or losses caused to investors may separately form part of the settlement terms under Regulation 9.
Discretion in exceptional cases (Regulation 10(7)): The 2026 framework expressly empowers the Panel of Whole-Time Members to determine the settlement amount where it cannot be calculated under Regulations 10–16 due to the peculiar nature of the alleged default or the facts and circumstances of the case. The provision specifically addresses situations where the prescribed calculation methodology cannot be applied.
Minimum settlement amount (Regulation 10): Under the 2018 framework, the minimum indicative amount was ₹3 lakh for first-time applicants and ₹7 lakh for others. The 2026 framework retains these minimum amounts but revises the definition of a first-time applicant. A person must have neither a prior adverse order nor an earlier settlement order to qualify.
Settlement terms and disgorgement (Regulation 9): Under the 2018 framework, settlement terms could include monetary and non-monetary conditions, including disgorgement. Under the 2026 framework, settlement terms are expressly separated into the settlement amount, disgorgement of wrongful gains, losses avoided or investor losses, and remedial and regulatory terms, as applicable.
Remedial and Regulatory terms (Regulations 17–18): Under the 2018 framework, non-monetary settlement terms included market restrictions, disgorgement and compliance measures. The 2026 framework expressly provides for additional terms, including clawback of benefits received in violation of securities laws, refund of monies received in contravention of securities laws, corrective disclosures for incorrect financial statements and restoration of diverted or siphoned funds with interest. Further, Regulation 18(2) permits consideration of settlement of serious violations where appropriate monetary and remedial terms adequately address their consequences.
Interest on amounts payable (Regulation 20): Under the 2018 framework, interest-related requirements formed part of the applicable settlement provisions and calculations. The 2026 framework introduces a separate regulation prescribing interest on the amounts covered by Regulation 20. It provides for interest at 9% per annum up to the prescribed stage and 12% after a final order, where applicable, with interest calculated on the principal amount.

6. Rejection, withdrawal and reapplication

Reapplication after rejection (Regulation 7): Under the 2018 framework, an earlier rejection generally restricted a fresh settlement application for the same alleged default. Under the 2026 framework, a rejected application may be filed again at a subsequent stage, provided the reason for rejection no longer applies, subject to an additional 20% settlement amount.
Reapplication after withdrawal (Regulation 7): Under the 2018 framework, a withdrawn application could be reconsidered exceptionally on the recommendation of HPAC, subject to an increase of at least 50% in the settlement amount. Under the 2026 framework, a withdrawn application may be filed again at the same or subsequent stage, subject to an additional 20%.

7. Confidentiality settlement

Confidentiality mechanism (Regulations 30–33): Under the 2018 framework, Regulations 19–22 provided a special settlement mechanism for persons offering substantial assistance to SEBI in investigations or related proceedings. The 2026 framework retains this mechanism under Regulations 30–33, with revised procedural wording and provisions relating to cooperation, confidentiality and interim assurance. Accordingly, the confidentiality mechanism itself is not a new feature of the 2026 Regulations.

8. Effect and revocation of settlement orders

Revocation of settlement orders (Regulation 39): Under the 2018 framework, Regulation 28 provided that a settlement order would stand revoked if the applicant failed to comply with its terms, did not make full and true disclosures or breached undertakings and waivers. Under the 2026 framework, SEBI is required to provide an opportunity of hearing before revoking the order. Upon revocation, the relevant proceedings may be restored or initiated, and amounts already paid are not refunded.
Effect on other noticees (Regulation 38): Under the 2018 framework, settlement by one applicant did not automatically affect third-party rights or proceedings against other persons. The 2026 framework retains these protections and expressly clarifies that settlement by one noticee does not amount to exoneration of the other noticees.

9. Transitional provisions

One-time settlement opportunity (Regulation 4(3)–(4)): Under the 2018 framework, there was no corresponding one-time window for matters pending upon commencement of the 2026 Regulations. The 2026 framework allows eligible applicants to file a settlement application within 90 days of commencement where no application had previously been filed or an earlier application was rejected, returned or withdrawn under the 2018 Regulations. Such applications attract an additional 20% settlement amount.
Treatment of pending applications (Regulation 44): The 2026 Regulations prescribe the following transitional treatment for settlement applications pending as on the date of commencement, depending on the stage reached under the 2018 framework:

Status of application under the 2018 framework	Treatment under the 2026 framework
Settlement terms approved by WTM Panel	Application will be processed in accordance with the terms already approved under the 2018 framework.
HPAC recommendation made, but WTM Panel approval pending	Applicant may opt for either (a) processing based on the settlement amount recommended by HPAC under the 2018 framework, or (b) fresh processing under the 2026 framework. The option must be exercised within 30 days of receipt of SEBI’s notice.
HPAC recommendation not yet made	Application will be processed under the 2026 framework through a fresh Internal Committee meeting.

Conclusion

The 2026 Regulations retain the basic concept of settlement under the earlier framework but introduce important changes in eligibility, timelines, financial calculations and settlement procedures. The general pre-SCN notice, longer post-SCN period, monetary threshold-based fast-track settlement and greater flexibility for reapplication provide additional opportunities for applicants.

At the same time, the revised calculation method, mandatory eligibility exclusions and remedial obligations require applicants to assess both the financial and compliance implications before seeking settlement.

For companies and other persons facing SEBI proceedings, the key is to identify the applicable settlement route, assess the complete settlement exposure and act within the prescribed timelines.

The article is written by Ms. Radhika Varade.