SEBI Plans Facelift For Consent-Based Settlement Mechanism

The Securities and Exchange Board of India is considering an overhaul of its consent-based settlement mechanism to enhance its effectiveness and attract more listed companies entangled in regulatory disputes, according to people familiar with the matter.

The development came as the consent route loses traction. In recent years, there has been a steady decline in the number of companies opting for this route—largely due to rigid eligibility norms, procedural delays, and limited flexibility in settlement terms.

The regulator is evaluating key changes to both monetary and non-monetary settlement terms, a senior official told NDTV Profit. Among the proposals under discussion are the allowance for the re-filing of previously rejected applications and a streamlining of the three-tier review process that governs the current framework.

The consent mechanism allows entities to settle cases involving securities law violations or misconduct without admitting or denying guilt. It is intended to offer a faster resolution and reduce the burden of litigation. However, stakeholders have flagged the process as cumbersome and opaque, which has discouraged companies from using it.

SEBI received 434 settlement applications during the financial year ending March 2024, of which only 114 were cleared. A significant 169 were rejected, underlining the perceived inefficiencies of the system.

Non-monetary settlement terms, often seen as overly harsh, can include suspension of certain business activities, exit from management roles, or restrictions from accessing the capital market. The regulator is now reviewing the proportionality and scope of these conditions.

SEBI’s proposed revamp aims to restore credibility and efficiency to the mechanism, ensuring that it serves as a viable alternative for resolving regulatory disputes—especially for firms willing to comply and move forward without admitting liability.

If implemented, the changes are expected to make the settlement route more accessible, time-efficient, and balanced, aligning with SEBI’s broader goal of strengthening market integrity while supporting fair and timely resolution of disputes.