SÃO PAULO—Brazil’s financial markets regulator, citing the gravity of the criminal charges involved, on Tuesday rejected a proposed settlement with a former official at aircraft maker Embraer SA who allegedly paid bribes to win a defense contract with the Dominican Republic.

An Embraer spokesman said the official, Orlando José Ferreira Neto, is no longer employed by the company. The spokesman declined to comment further on the regulator’s decision.

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