SEBI rewrites its settlement regime and opens more commodity derivatives to foreign investors

The Securities and Exchange Board of India (SEBI) approved 13 items at its 215th board meeting in Mumbai on 24 September. For market participants, the most significant are a new enforcement settlement regime and wider access for foreign portfolio investors (FPIs) to exchange-traded commodity derivatives.

Settlement by formula

The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 will replace the 2018 regulations. They take effect on the day after the 30th day from notification.

The formula. The settlement amount will be calculated as Base Amount × (S + R + G + A − M) + legal costs, where:

• the base amount is linked to the minimum statutory penalty for the violation
• S reflects the stage of proceedings
• R reflects regulatory action
• G reflects gravity
• A and M are aggravating and mitigating factors

Wrongful gains, losses avoided and losses caused to investors no longer feed into the base amount. They will be disgorged separately, which SEBI says removes double counting. Interest on disgorgement will generally be 9% a year.

Wider access to settlement.

• SEBI will issue a settlement notice before a show-cause notice, which it likens to a Wells notice, giving 60 days to apply. No such notice will be issued where prosecution or an interim order is contemplated.
• The window to apply after a show-cause notice increases from 60 to 90 days.
• A fast-track route will cover cases with settlement amounts up to ₹10 lakh and certain violations, such as disclosure breaches.
• A one-time 90-day window will let entities that did not apply, or whose applications failed under the 2018 rules, apply for specified pending proceedings at an additional 20%.

Illiquid stock options scheme. SEBI also announced a fourth settlement scheme for non-genuine trades in BSE’s illiquid stock options between 1 April 2014 and 30 September 2015. Amounts start at ₹1,44,000 for one to five contracts.

FPIs and commodity derivatives

To deepen liquidity, FPIs will be allowed to trade:

• non-agricultural index derivatives, whether or not the underlying is cash-settled
• non-cash-settled non-agricultural commodity derivatives

This comes with a safeguard. FPIs must exit before the tender period, three days before expiry, and may not increase positions from T−3. Each FPI must sign an agreement with its trading or clearing member. Under that agreement, any residual open positions can be passed to the member at the exchange’s closing or daily settlement price, and that transfer is treated as a trade.

Other approvals

• Accredited investors: persons resident outside India, including FPIs, will be deemed accredited investors. Fund managers will be able to accredit investors directly.
• Portfolio managers: new Portfolio Managers Regulations, 2026 allow investment in exchange-traded derivatives up to 1.25 times client AUM and in foreign securities.
• Research: research analysts will no longer have to keep call recordings with institutional clients.
• Advertising: a Common Advertisement Code replaces entity-specific advertising rules.

Why it matters

For global firms with Indian enforcement exposure, the settlement overhaul makes outcomes more predictable. The pre-notice gives firms a 60-day chance to resolve matters before a show-cause notice is issued.

The commodity change is a real opening for macro and commodity funds. Operationally, it puts the work on clearing members, which will need automated controls on positions from T−3 and agreed terms for moving positions to the member before the tender period.

Sources

• SEBI, PR No. 59/2026, “Key decisions taken in the SEBI Board Meeting dated 24th September, 2026” — https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2026/key-decisions-taken-in-the-sebi-board-meeting-dated-24th-september-2026_104725.html
• SEBI, PR No. 59/2026 (PDF) — https://www.sebi.gov.in/sebi_data/attachdocs/sep-2026/1790259036651.pdf