Sebi Overhauls Broker Rules, Unlocks Wider Cross-Regulator Activities

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AuthorIshaan Verma|Published at:
Sebi Overhauls Broker Rules, Unlocks Wider Cross-Regulator Activities
Overview

Sebi has approved a significant overhaul of stock broker regulations, drastically cutting down pages and introducing flexibility. New rules permit brokers to engage in activities regulated by other financial bodies, potentially streamlining operations. Changes also target proprietary trading definitions and default fee interest rates, aiming for simpler compliance.

Streamlined Regulations

The Securities and Exchange Board of India (Sebi) has approved a substantial review of its 30-year-old stock broker regulations, condensing the rulebook from 59 pages to 29. This move, approved at the regulator's December 2025 board meeting, aims to simplify compliance and enhance efficiency within the financial sector. Final regulations and their official notification are now anticipated.

Expanded Business Scope

A key provision allows stock brokers to undertake activities under the regulatory framework of other financial regulators or designated authorities, provided these are conducted through a separate business unit. This builds upon previous circulars that enabled brokers to operate in the International Financial Services Centre (IFSC) in GIFT City, signaling a broader approach to operational flexibility.

Enhanced Clarity and Fairness

Modifications are expected in the definition of proprietary trading to distinguish clearly between a broker's own trades and those conducted for clients. The definition of 'employees' will be removed to revert to its natural meaning. Criteria for becoming a Qualified Stock Broker (QSB), such as compliance and grievance redressal scores, are also being revised.

Investor Protection Measures

In cases of default in fee payments, the interest rate may change from 15% annually to 1% per month or part thereof, aligning with Income Tax Act provisions. Accountability for fraud prevention mechanisms will be fixed on the board of directors and the audit committee. The timeframe for reporting suspicious transactions will align with the Prevention of Money Laundering Act, 2002 (PMLA). Processes for brokers exiting the market via registration surrender are also being smoothed.

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