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Informist, Thursday, Sept. 24, 2026

 

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--SEBI Varshney: Egregious cases will not be settled in new settlement norms
--CONTEXT:SEBI Whole-Time Member Varshney at post-board meet press conference
--SEBI chair: New norms allow fast-track settlement for disclosure breach
--SEBI chair: New settlement proceedings norms aimed at reducing litigation
--SEBI approves overhaul of settlement proceedings regulations

 

MUMBAI – The Securities and Exchange Board of India is examining the vexatious issue of whether listed companies which file for settlement of possible violations of norms before any show-cause notice is issued by the regulator need to disclose that immediately as per the listing regulations, Whole-Time Member Kamlesh Chandra Varshney told a press conference Thursday after SEBI's board meeting. Varshney said some companies may be motivated to file for settlement before a show-cause notice is issued because the settlement amounts are lower, but SEBI does not proceed on such settlement applications till its preliminary investigation is complete.

 

To a question from Informist on whether settlement orders and the settlement amounts underline accurately the gravity of the violations committed, SEBI Chairman Tuhin Kanta Pandey said the maximum penalty amounts are prescribed in the securities laws. Someone may interpret a settlement case to involve serious violations and wonder whether the settlement amounts allow the settling entity to get away, he said. But SEBI has to remain within the bounds of law.

 

The SEBI chairman's comments came two days after the regulator issued a settlement order in the matter of allegations against five Adani group companies of having committed violations of related party transaction disclosure norms. In this order, issued Tuesday, SEBI agreed to settlement terms offered by the Adani group for a collective amount of only INR 15.08 million.

 

At Thursday's board meeting, SEBI approved the replacement of current settlement proceedings regulations with a new one. The SEBI chairman said the new regulations are aimed at reducing litigation. Varshney said egregious cases will not be allowed to be settled under the new regulations, as is also the case with the current norms.

 

SEBI said in the press release that the new regulations are designed to make the framework less discretionary, easier to understand, and also to fast-track less serious matters. In cases pertaining to misrepresentation of financial statements and siphoning of funds, the new regulations will permit settlement subject to remedial and regulatory terms, including disclosures and bringing back diverted funds, as per the press release.

 

In cases where adjudication proceedings have been initiated and where the show-cause notice or order passed quantifies the wrongful gains, loss avoided, or loss caused to investors, such amounts will be disgorged before settlement orders are passed, the press release said. Under the current settlement proceedings regulations too, SEBI has passed various settlement orders involving disgorgements.

 

The new regulations for settlement proceedings will have a new formula for computation of the settlement amount. There will be a base amount that will be linked to the minimum penalty provided for the violation under securities laws, with multipliers based on type of applicant. If the applicant is a market infrastructure entity the multiplier will be higher at 5.5, the SEBI chairman told the press conference.

 

The base amount will be multiplied with factors such as stage of proceedings, regulatory action, gravity of the default, and aggravating and mitigating factors, SEBI said in its press release. There will also be expanded access to settlement with SEBI issuing a settlement notice giving 60 days to file a settlement application before issuing a show-cause notice. However, such a notice will not be issued where passing of an interim order or initiation of prosecution is contemplated, it said.  End

 

Reported by Rajesh Gajra

Edited by Rajeev Pai

 

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