🗞️ Why in News The Securities and Exchange Board of India (SEBI), at its 215th Board meeting in Mumbai on 24 September 2026, approved the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 to replace the 2018 settlement rules, new Portfolio Managers Regulations, 2026, a Common Advertisement Code for regulated entities, and FPI entry into more commodity derivatives, among other decisions.
The Headline Decision: A New Settlement Framework
Why it matters. Settlement lets a person facing SEBI proceedings end them by paying an amount and accepting conditions, without admitting or denying the findings. It saves years of litigation, but critics have said the amounts were unpredictable and too discretionary. On 23 September we reported how five Adani group companies settled disclosure proceedings under the 2018 Regulations (see our report on that order); the Board has now approved their replacement.
| Feature | Settlement Regulations, 2026 |
|---|---|
| Name | SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 |
| Commencement | The day after the 30th day from notification |
| Settlement terms | Settlement amount, disgorgement of wrongful gains where applicable, and Remedial and Regulatory Terms (earlier called non-monetary terms) |
| Formula | Settlement Amount = Base Amount × (S + R + G + A − M) + Legal Costs |
| Base Amount | Linked to the minimum penalty for the violation, with multipliers by type of applicant |
| Wrongful gains | Kept out of the Base Amount and disgorged separately, ending double counting |
| Settlement notice before a show cause notice | SEBI will issue a notice giving 60 days to apply (not where prosecution or an interim order is contemplated) |
| Time to apply after a show cause notice | Raised from 60 to 90 days |
| Fast track | Cases with a settlement amount up to Rs 10 lakh, and specified violations such as disclosure lapses |
| One-time window | 90 days from commencement, for specified proceedings still pending before the Board, open to those who did not apply earlier or whose applications under the 2018 Regulations were rejected, withdrawn or returned; an additional 20 per cent is payable |
| Interest on disgorgement | 9 per cent a year (12 per cent after a final order in other matters); no interest on interest |
Reading the formula. In the formula, S is the stage of proceedings, R the regulatory action factor, G the gravity of the default, A aggravating factors and M mitigating factors. The aim, in SEBI’s words, is a framework that is “simpler, less discretionary, easier to understand, more predictable”, while still deterring violators.
The notice before the notice. SEBI’s press release calls the pre-show-cause settlement notice a Wells notice, after the practice of the United States Securities and Exchange Commission, where such a letter tells a person that staff intend to recommend enforcement action and invites a response. SEBI’s version goes further: it invites the person to settle before formal proceedings begin, which saves time for both sides.
Harder cases brought in. The 2026 Regulations also allow settlement of cases involving misrepresentation of financial statements or diversion of funds, but only with appropriate remedial terms, such as disclosures and bringing back diverted funds.
Portfolio Managers Regulations, 2026
Once notified, the new regulations will supersede the 2020 regulations for Portfolio Management Services (PMS). They follow, as background, a consultation paper of 23 July 2026.
| Change | What it does |
|---|---|
| Wider investments | IPOs and primary debt issues; up to 10 per cent of client assets in investment-grade, unlisted non-convertible debt (discretionary PMS, with consent); exchange-traded derivatives up to 1.25 times client assets; foreign securities within FEMA and the RBI’s Liberalised Remittance Scheme |
| PRIM | A Portfolio Managers Route for Investing in Mutual Fund units through direct plans: minimum ticket Rs 25 lakh; existing portfolio managers may offer it through a separate investment approach, while a new registrant operating only under PRIM needs a net worth of Rs 2 crore; fixed fee capped at 1 per cent of client assets, and a performance-based fee is also permitted |
| Independent Fund Managers | May manage client portfolios in association with a registered portfolio manager, which bears full responsibility |
| Easier compliance | A graduate may be Principal Officer; relaxed dealing-room norms for managers with assets under Rs 100 crore; a standard Investment Management Agreement |
| Simpler text | Regulations cut from 70 to 33 pages; provisos from 47 to 4 |
Other Decisions
| Decision | Detail |
|---|---|
| Common Advertisement Code | One code for stock brokers, depository participants, investment advisers, research analysts, online bond platforms, portfolio managers and mutual funds; celebrity endorsement allowed at brand level with prior approval; other ads need no prior approval but must be reported within three working days |
| FPIs in commodity derivatives | Foreign portfolio investors may trade non-agricultural index contracts and non-cash-settled non-agricultural contracts, but must exit before the tender period (three days before expiry) so that no delivery obligation arises |
| Vault Managers | Scope widened from Electronic Gold Receipts to bullion behind ETFs and derivatives; net worth to be raised from Rs 50 crore to Rs 75 crore |
| Depository Receipts on REITs and InvITs | Enabling provision, with issue and listing in the International Financial Services Centre to begin with |
| Research Analysts | Call-recording requirement relaxed for institutional clients |
Why It Matters
Predictability versus discretion. A formula makes outcomes easier to anticipate and harder to question, which should increase settlements and free SEBI’s enforcement capacity. The risk is that a formula can be gamed, or that large violators treat settlement as a cost of doing business. Keeping disgorgement separate and charging interest from the date of the violation are the Board’s answer: the wrongdoer should not keep the gain.
Ease of doing business with safeguards. The advertising code, the PMS rewrite and FPI access to commodity derivatives all lower compliance costs or widen markets. Each carries a safeguard: post-issuance reporting for ads, full liability of the portfolio manager for independent fund managers, and forced exit before delivery for FPIs.
UPSC Relevance
GS Paper 3. Indian economy: mobilisation of resources; capital markets and their regulation. GS Paper 2. Statutory, regulatory and quasi-judicial bodies.
A question worth preparing. “Settlement mechanisms in securities regulation trade deterrence for speed.” Examine with reference to SEBI’s new settlement framework. (250 words)
The Mains framing. Explain what settlement is (Section 15JB of the SEBI Act, 1992, inserted in 2014 with retrospective effect from 20 April 2007) and why it exists. Set out the old criticism (discretion, low amounts, no findings). Show how the 2026 Regulations respond: a formula, separate disgorgement, interest, a pre-notice window and fast track. Close with the balance: settlements must not become a price for misconduct, so serious fraud and market-wide harm need adjudication and, where warranted, prosecution.
📌 Facts Corner, Knowledgepedia
Prelims, statement-ready facts:
- SEBI’s 215th Board meeting was held in Mumbai on 24 September 2026.
- The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 will replace the 2018 Settlement Regulations once notified.
- Settlement Amount = Base Amount × (S + R + G + A − M) + Legal Costs; the Base Amount is tied to the minimum penalty.
- Wrongful gains are excluded from the Base Amount and disgorged separately, with interest at 9 per cent a year (12 per cent after a final order in other matters).
- Time to apply for settlement after a show cause notice is to rise from 60 to 90 days.
- A pre-show-cause settlement notice gives 60 days to apply for settlement.
- The new Portfolio Managers Regulations, 2026 will supersede the 2020 regulations.
- PRIM: a route for portfolio managers to invest in direct plans of mutual funds; minimum ticket Rs 25 lakh.
- Vault Manager net worth requirement to be raised from Rs 50 crore to Rs 75 crore.
Prelims, the traps:
- A settlement is made without admitting or denying findings; it is neither a conviction nor a clean chit.
- Section 15JB, SEBI Act (settlement) was inserted by a 2014 amendment, with retrospective effect from 20 April 2007.
- FPIs in commodity derivatives must exit before the tender period; they may not take delivery.
Mains, arguments and keywords:
- A formula reduces discretion and litigation, but deterrence depends on disgorgement and on keeping serious fraud out of settlement.
- Keywords: settlement, disgorgement, Wells notice, fast track, remedial and regulatory terms, ease of doing business, investor protection.
Interview, be ready for:
- “Does settlement let the rich buy their way out?” Not if gains are disgorged with interest and grave cases are excluded; speed also has value for investors.
Sources: SEBI, Indian Express
Source: SEBI Board Rewrites the Settlement Rules and the Portfolio Managers Regulations, Adopts a Common Advertisement Code — Ujiyari.com | Free UPSC & State PCS Current Affairs
