Capital market regulator Sebi recently floated a settlement scheme for brokers who were associated with unregistered algo platforms, after finding industry-wide violations, for which more than 110 brokers, including the major ones were issued a show cause notice.
At the request of the industry, Sebi proposed a settlement scheme that was cleared by the board in March, and later notified in June, first reported by Moneycontrol on March 20, 2025.
Who can apply for settlement?
Registered stockbrokers associated with algo trading platforms, against whom proceedings had been initiated by Sebi which are pending before an authority or forum, viz. Adjudicating Officer, SAT or courts.
What if a settlement application has already been filed?
Brokers that have already filed settlement application in respect of the Sebi show cause notice need not file a new settlement application. Such brokers need to just pay the settlement amount of Rs 1 lakh, as specified in the scheme, with registration fee. Applicants must submit scanned undertakings and waiver on a judicial stamp paper, a self-attested copy of PAN and application for settlement and fees. The registration fee of Rs 29,500 (25,000+18 per cent GST) will also have to be paid.
Where to file the settlement application?
Any entity desirous of filing a settlement application under the scheme has to visit the Sebi intermediary’s portal and select the “Settlement Scheme for association with certain Algo platforms 2025” option.
After filing the required details, the option of online payment will be visible. For any help, Sebi has provided a dedicated email ID: algoplatformscheme@sebi.gov.in and helpline number 022-26449333/40459333 between 14:00 to 17:00 on weekdays excluding public holidays.
When will the settlement order be passed?
After closure of the scheme and verification of all records of the applicants, a composite settlement order shall be passed by the competent authority in Sebi. The validity of the scheme is from June 16, 2025 till September 16, 2025.
What if entities do not avail the scheme?
Actions as per the relevant provisions of Sebi laws will continue against the entities who have received show cause notice.
What’s the expert view?
Sumit Agrawal, Senior Partner, Regstreet Law Advisors and a former Sebi Officer said, “The scheme offers a structured mechanism by way of fixed settlement amount of 1 lakh and compliance parameters, that reduces litigation, brings procedural closure, and provides much-needed regulatory certainty to over a hundred stockbrokers.”
He added that the requirement to waive off appellate rights and provide sweeping undertakings, even under a ‘neither admit nor deny’ construct, poses legal dilemmas, particularly for brokers with cross-border businesses or fiduciary obligations. Agarwal has suggested the steps to ensure future safeguards around API integrations, and to avoid regulatory overreach, as well as to restore trust in the enforcement process.