The Securities and Exchange Board of India is finalizing a fourth settlement scheme for entities involved in non-genuine reversal trades in the illiquid stock options segment on the BSE. This initiative aims to clear a regulatory backlog from 2014-2015, allowing eligible entities to resolve pending legal proceedings without admitting guilt.
The Securities and Exchange Board of India (SEBI) is moving to reopen a settlement window for entities linked to the illiquid stock options (ISO) segment on the Bombay Stock Exchange (BSE). The proposal aims to resolve legacy cases involving trading activity conducted between April 1, 2014, and September 30, 2015. This would mark the fourth such settlement opportunity, following previous rounds conducted in 2020, 2022, and 2024.
Clearing Historical Litigation
For nearly a decade, the regulator has been processing thousands of cases stemming from the 2014-2015 investigation, where numerous entities were flagged for executing non-genuine reversal trades. These transactions were alleged to have been used to generate artificial trading volumes and create a deceptive appearance of market activity. By establishing these recurring settlement windows, the regulator seeks to clear the substantial backlog of cases that remain pending before adjudicating officers, recovery officers, and the Securities Appellate Tribunal (SAT).
The settlement process allows eligible entities to resolve their disputes by paying a specific settlement amount, along with application fees and applicable taxes, typically without having to admit or deny guilt. This provides a mechanism for entities to avoid the prolonged uncertainty, legal costs, and administrative burden of continuing their litigation against the regulator. If the board approves the current plan, an official announcement is anticipated by the end of November 2026.
Regulatory Overhaul and Future Focus
This initiative coincides with a broader effort by SEBI to modernize its enforcement framework. In August 2026, the regulator issued a consultation paper detailing a comprehensive overhaul of its Settlement Proceedings Regulations. The proposals include changes to how settlement amounts and penalty calculations are determined, with the goal of making the process more predictable for market participants. The regulator has invited public comments on these proposed changes until September 4, 2026.
For the regulator, resolving these legacy issues is a strategic priority, as it frees up internal resources to focus on contemporary market risks and emerging violations. For the entities involved, the primary monitorable will be the final terms and conditions once the notification is issued. Investors and market participants involved in these historical cases will need to watch for the official release, which will detail eligibility criteria and the duration of the window, currently expected to be open for three months.