SEBI revamps settlement framework, rolls out common advertising code and reviews closing auction

SEBI announced on Thursday a new settlement framework that changes how penalties are calculated and eases the process for entities seeking to settle. The revised rules set a base amount tied to the minimum penalty and add multipliers for the stage of proceedings, a regulatory‑action factor, the gravity of the violation and any aggravating factors. Wrongful gains, avoided losses or investor losses are now excluded from the base amount and will be disgorged separately, ending the previous double‑counting issue. Entities under investigation will receive a settlement notice before a show‑cause notice and will have 60 days to submit a settlement application.

Advertising Code

SEBI also approved a common advertising code for all regulated entities. The code allows most ads, including brand‑level promotions using celebrities, to run without prior regulator approval. Only celebrity endorsements by stock brokers, depository participants, investment advisers and mutual funds will still need approval.

Closing Auction

Chairman Tuhin Kanta Pandey backed the closing auction session reform, noting markets must adapt to new realities. SEBI received over 3,500 comments on its consultation paper proposing a blended price‑determination system that combines volume‑weighted average price with the closing auction. The paper closes on October 3, after which SEBI will review the feedback before deciding on implementation. The changes come as five listed Adani Group companies recently settled SEBI adjudication proceedings for a total of Rs 1.5 crore over alleged disclosure and corporate‑governance breaches linked to a Hindenburg research report. SEBI said the overall philosophy of settlement – ending cases without admission of guilt – remains unchanged, with whole‑time members retaining discretion to reject any case deemed egregious.