The Impressive TimesNew Delhi – Capital market violators are increasingly choosing to settle with the Securities and Exchange Board of India (Sebi) rather than fight lengthy legal battles. Data from Sebi’s FY25 annual report shows a sharp rise in settlement applications, with an average of nearly three filed each working day — almost double the figure from the previous year.
In FY25, Sebi received 703 settlement applications compared to 403 in FY24. The regulator collected ₹799 crore in settlement charges, a steep jump from ₹94.5 crore the year before. Disgorgement charges added another ₹65 crore. The increase is expected to continue, especially with major cases — such as the National Stock Exchange’s (NSE) proposed ₹1,400 crore settlement for legacy co-location and dark fibre issues — still under review. NSE has already paid ₹40.35 crore in June this year for violations identified during Sebi’s 2021–2022 inspection.
A senior regulatory official, speaking on condition of anonymity, attributed the trend to improved investigative capabilities. “The quality of enforcement and evidence collection has gone up significantly, leaving offenders with less scope to contest,” the official said.
However, Sumit Agrawal, former Sebi officer and Senior Partner at Regstreet Law Advisors, criticised the approach as coercive rather than consensual. He argued that Sebi’s aggressive legal strategy often forces companies into settlements to avoid prolonged uncertainty. “Settlement becomes less a choice and more a compelled outcome,” he noted.
The annual report also highlighted that of the 703 applications, 284 were settled through orders, while 272 were returned, rejected, or withdrawn. Cases spanned alleged violations of takeover rules, insider trading laws, fraudulent trade practices, disclosure norms, foreign portfolio investment (FPI) rules, and mutual fund regulations.
Legal experts say the current settlement system needs reform, citing opaque decision-making, arbitrary penalty calculations, and the absence of statutory timelines for investigations and orders. They also note that settlements now publicly disclose the alleged violations — a change from earlier years when such details remained confidential, making settlement a reputational shield.
The shift towards settlements has eased pressure on the Securities Appellate Tribunal (SAT), with new appeals dropping to 533 in FY25 from 821 in FY24.
With enforcement tightening and penalties rising, the settlement route appears to be the preferred choice for market participants — even if not always by choice.
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