Archive · 28 Sep 2026
SEBI Settlement Overhaul Separates Fund Recovery From Settlement Payments
SEBI is changing how companies can settle certain regulatory cases.
Under the proposal, paying a settlement amount is different from returning money allegedly taken from a company.
Money returned to the company is meant to help shareholders.
A separate settlement payment goes to the government’s Consolidated Fund.
Disgorgement, when applicable, is also handled separately and generally goes to an investor protection fund.
This means returning ₹100 crore would not automatically count as paying a ₹100 crore settlement.
Companies may be able to ask for settlement earlier, before receiving a formal show-cause notice.
SEBI also wants clearer formulas and the ability to cancel settlements when information was false or requirements were not followed.
More details will be provided in a later circular.
SEBI’s revised framework will separate recovery of allegedly diverted funds from regulatory settlement payments.
Settlement amounts go to the Consolidated Fund of India, while disgorgement generally goes to the Investor Protection and Education Fund.
Returning diverted money to a company will not ordinarily replace settlement payments or applicable disgorgement.
The framework proposes pre-show-cause-notice settlements, revised calculation rules and a revocation provision for misrepresentation or non-compliance.
SEBI said operational details on recovery, disgorgement and shareholder restitution will follow in a subsequent circular.
- Who
- The Securities and Exchange Board of India, its chairman Tuhin Kanta Pandey, lawyers and companies involved in regulatory proceedings.
- What
- SEBI has proposed a revised settlement framework separating fund recovery, disgorgement and shareholder restitution from regulatory settlement payments.
- When
- The framework was reported on September 28, 2026.
- Where
- India, under the regulatory framework of the Securities and Exchange Board of India.
- Why
- The changes are intended to improve predictability, enable earlier settlements, reduce parallel proceedings and ensure that allegedly diverted funds are returned separately to companies or shareholders.
Reform Supporters
Legal Cautions
Earlier settlements
Reform Supporters
SEBI and supporting lawyers said pre-show-cause settlement could let entities approach the regulator earlier and reduce the time and cost of parallel proceedings.
Legal Cautions
A lawyer cautioned that the proposed lower pre-show-cause factor may not produce a substantially lower payment because the default’s nature and other factors will also affect the calculation.
Recovery and settlement
Reform Supporters
SEBI officials and lawyers said separating the processes could improve shareholder recovery by requiring restoration, disgorgement and remedial measures independently where appropriate.
Legal Cautions
Legal experts emphasized that the operational framework for calculating recovery, disgorgement and shareholder restitution is not yet detailed, leaving implementation questions for a later circular.
- Regulator
- Securities and Exchange Board of India (SEBI)
- Publication date
- September 28, 2026
- Settlement recipient
- The Consolidated Fund of India
- Disgorgement recipient
- Generally, the Investor Protection and Education Fund
- Fund recovery
- Recovery of allegedly diverted money remains separate from the settlement amount
- Proposed early route
- A settlement notice could be issued before a show-cause notice in certain cases
- Future detail
- SEBI plans to specify operational rules through a subsequent circular