SEBI eases settlement norms, overhauls PMS regulations to improve market efficiency

The Securities and Exchange Board of India (SEBI) has approved new settlement regulations aimed at reducing regulatory discretion and making it easier for entities facing enforcement proceedings to settle cases.The new framework replaces the 2018 Settlement Proceedings Regulations, under which certain categories of violations — including those involving significant market impact, substantial investor losses and threats to market integrity — were excluded from settlement mechanisms.Addressing concerns over whether the revised framework could allow violators to settle by paying amounts lower than the impact caused by their actions, SEBI Whole-Time Member Kamlesh Varshney said “the philosophy remains the same. The discretion to reject settlement applications still stays with the high-powered committee.”He added that the new regulations were aligned with provisions introduced in the Securities Contracts (Regulation) Act, which provide a statutory framework for settlement and related mechanisms.Under the revised rules, SEBI has introduced a new formula for calculating settlement amounts. The regulator has also created a fast-track mechanism that allows cases to be settled without being referred to the High Powered Committee if the calculated settlement amount is below ₹10 lakh. The deadline for filing settlement applications has also been extended to 90 days from the date of the show-cause notice, compared with the earlier limit of 60 days.In another key decision, SEBI approved a common advertisement code for market intermediaries and regulated entities. The move follows consultations with industry bodies, including the Industry Standards Forum and the Association of Mutual Funds in India (AMFI), with the objective of simplifying and standardising advertising practices across the securities market.SEBI also approved a comprehensive overhaul of the Portfolio Managers Regulations, aimed at expanding the portfolio management services (PMS) industry, easing compliance requirements, consolidating regulations and removing outdated provisions.The revised PMS framework allows portfolio managers to invest in initial public offerings (IPOs) and newly listed debt securities, along with introducing other operational relaxations designed to provide greater flexibility to investors and service providers.Portfolio Management Services involve professional managers handling an investor’s portfolio based on individual financial objectives. Unlike mutual funds, where investors own units in a pooled investment vehicle, PMS provides direct ownership of securities and other assets held in the investor’s name.The PMS industry has grown at a slower pace compared with the Alternative Investment Fund (AIF) sector, partly due to taxation issues and regulatory constraints. SEBI’s latest reforms seek to address these hurdles and make PMS more competitive by improving operational flexibility and simplifying compliance requirements. Published - September 24, 2026 10:01 pm IST