The Securities and Exchange Board of India has approved a broad package of capital-market reforms covering regulatory settlements, advertising by intermediaries and alternative investment funds. Under the revised settlement framework, the amount paid to resolve proceedings will be calculated using the minimum statutory penalty as a base, adjusted for the stage of the case, the gravity of the violation, regulatory-action factors and aggravating circumstances. Wrongful gains, avoided losses and investor losses will be excluded from the base calculation and recovered separately through disgorgement.
Separating disgorgement from the settlement amount is intended to prevent the same economic benefit or investor loss from being counted twice. Settlement continues to allow an entity to conclude proceedings without admitting or denying guilt, but SEBI’s whole-time-member panel retains the authority to reject applications in serious cases. The revised regulations are scheduled to take effect 30 days after notification.
SEBI will also introduce a settlement notice before issuing a show-cause notice. An entity receiving such a notice will have 60 days to apply for settlement. The regulator expects the additional window to resolve eligible cases earlier and make outcomes more consistent, while preserving formal enforcement for matters unsuitable for settlement.
A Common Advertisement Code has been approved for stockbrokers, depository participants, investment advisers, research analysts, online bond-platform providers, portfolio managers and mutual funds or asset-management companies. It will replace category-specific advertising requirements contained in separate regulations, master circulars and supervisory rules. Most advertisements will no longer require advance approval and must instead be reported within three working days after publication.
Celebrity endorsements will be permitted for brand- or entity-level promotion, subject to prior approval and safeguards. Product-specific promotions remain more restricted. Regulated entities will also be allowed to use ratings and rankings issued by the Past Risk and Return Verification Agency. Routine factual communications and investor-service notices will be distinguished from promotional advertising under an illustrative exclusion list.
The board additionally extended an investor-protection rule across all legal forms of alternative investment funds. Fund managers and their officers will not be permitted to use AIF assets to cover their own losses, damages or dispute-resolution expenses. The safeguard previously applied principally to trust-structured funds. SEBI’s board decision was formally published on September 24.
