On September 24, the SEBI board approved replacing its 2018 settlement rules with a new set. These regulations took effect on November 7. While the West often uses massive payouts to close cases, India keeps a stricter path. Now, willful defaulters and fugitive economic offenders are entirely ineligible for any settlement.
On September 24, the Securities and Exchange Board of India (SEBI) board approved replacing its 2018 settlement rules with a new set. SEBI notified the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, on October 6, and they took effect on November 7.
The board also noted progress on a fourth settlement scheme for legacy illiquid stock options cases. As settlement takes deeper root, a pertinent question arises: what kind of road is it building?
The West has already paved its way. It’s an expressway: pay, then drive.
In August, Meta Platforms agreed to pay up to $18 billion to settle claims brought by most US provinces, alleging that Facebook and Instagram were designed to hook children. Meta admitted no wrongdoing, and the case is closed. The toll booth has been busy for years: Bank of America paid $16.65 billion in 2014, and JPMorgan Chase paid $13 billion in 2013, both over mortgage securities. BNP Paribas paid about $8.9 billion in 2014 for dealing with sanctioned countries. This month, Bank of America agreed to pay about $1.2 billion more for money-laundering and sanctions lapses.
Who pays the toll? Mostly, the shareholders. In Paris, the head of the company that runs the Eiffel Tower is stepping down for segregating the female staff during a visit by a delegation of monks. No money was lost, yet the top person took responsibility. At Meta, billions are paid, but no one pays out of their own pocket. The founder of Binance, the crypto exchange, is a rare exception: he pleaded guilty and paid a personal fine of $50 million.
India takes a different approach. Regulatory settlements are uncommon, with SEBI as the main exception. It introduced consent orders in April 2007, received statutory backing in 2014, and revised its regulations in 2018.
The gates shut
In November 2025, the Supreme Court allowed the Sandesara brothers of Sterling Biotech to settle all criminal cases against them for ₹5,100 crore and asked SEBI to close its proceedings. In April this year, SEBI’s final complaint was compounded.
The new regulations came after this. Yet willful defaulters, fraudulent borrowers and fugitive economic offenders remain entirely ineligible for settlement. Under the 2018 regulations, excluding them was discretionary; now it is mandatory. Violations with market-wide impact, losses to many investors, or harm to market integrity can be settled only on terms that repair the damage. Such restraint and SEBI’s choice of the service road are worth appreciating.
Three things right
Single formula. The settlement amount is calculated by multiplying a base amount by a set of factors. The base is the minimum penalty under the law, adjusted for the type of applicant. The factors account for the stage of the case, past record, gravity, and aggravating or mitigating circumstances. SEBI’s own data shows why this was needed: of 1,576 applications over three years, about 40 per cent were returned, rejected or withdrawn.
When settlements failed, the amounts SEBI had proposed averaged about eight times the penalty ultimately imposed. The formula aims to reduce that figure to about four times. In suitable cases, SEBI can offer settlement even before issuing a show cause notice. Small cases involving less than ₹10 lakh qualify for a fast track.
Gains are returned only once. Previously, wrongful gains were counted twice, once in the base amount and again as disgorgement. Now they are returned separately.
The road has a memory. The factor for each earlier settlement increases from 0.01 to 0.20. Executives are priced separately, starting at 3.5 times the minimum penalty. In the US, the same company names keep reappearing.
Three bends
Who you are matters more than what you did. An independent director’s penalty starts at twice the minimum; a company’s at four times; and a market infrastructure institution, such as a stock exchange or depository, at 5.5 times. For the same offence, an exchange pays 2.75 times as much as an independent director. Mitigating factors include indigence, insolvency, small company size, and public sector status.
The 2018 rules explicitly linked some amounts to net worth. The 2026 rules retain that logic in a less explicit form. Under the rule of law, the penalty should reflect the offence.
Size of the offence matters less. Consider two frauds of the same kind: one yields ₹6 crore and the other ₹600 crore. Both settle for the same amount; only the refund of gains differs. The only step tied to size is an extra 0.2 when client losses exceed ₹5 crore. Yet the law allows a penalty of up to ₹25 crore or three times the profit, whichever is higher.
The company can still pay the cheque. Applicants may pay “individually or jointly”; nothing prevents a company from covering its executive’s share. The deterrent therefore affects the company’s account, not the executive’s.
Three lessons
The West settles too freely. Its method is still worth a look.
Scale fines to the harm caused. Britain’s Financial Conduct Authority starts with a fine of up to 20 per cent of the revenue of the business in breach. The European Commission starts with up to 30 per cent of affected sales, multiplied by the number of years the breach lasted. SEBI could add a scale factor to its gravity component, using bands based on wrongful gain, investor loss or trade value.
Make hardship something a company must prove. The US Department of Justice asks companies pleading poverty to provide budgets, cash-flow projections and tax returns. The European Commission reduces a fine only when clear evidence shows it would threaten the firm’s survival. SEBI could remove indigence and insolvency from the formula and require separate applications supported by sworn financial statements. Then the same offence would carry the same price while recognising genuine hardship.
Let it hurt the individual too. When America’s SEC reaches a settlement with an individual, the consent order bars him from recovering the penalty from his company or insurer. SEBI could require executives to pay their share from their own funds, with notified criteria for naming the executive (s), to keep the process free from bias.
The destination
India need not compete with the West’s billion-dollar cheques. When everything is settled with money, penalties start to look like fees for violations. SEBI has kept the gravest defaulters off its main road. Now, ensure proportionality. Set a price that rises with the degree of harm and send the bill to the person responsible. Then the service road can lead to the right destination.