The Securities and Exchange Board of India (SEBI) has proposed a complete rewrite of its three-decade-old Stock Brokers Regulations to simplify compliance, eliminate outdated provisions, and align with today’s technology-led markets. Public comments on the draft are open until 3 September.
The new framework will replace the 1992 rules, which were designed for an era of physical paperwork, slower settlements, and limited retail participation. SEBI’s working group has consolidated years of circulars into the main regulations, harmonizing them with modern laws such as the Companies Act, 2013.
Key Modernization Measures
The draft introduces formal definitions for emerging market practices, including algorithmic trading, execution-only mutual fund platforms, and proprietary trading, ensuring a technology-neutral approach.
Record-keeping will now be entirely electronic, removing the need for outdated registers and easing archival requirements. Broker-to-broker registers within the same exchange will be scrapped, and key intimations can be routed directly through exchanges.
The “sub-broker” category will be removed, while duplicative disclosures will be merged into application forms. The “fit and proper” declarations will now be part of the main registration process.
Governance & Accountability
Brokerages structured as companies must have at least one resident director in India for 182 days each financial year. Any change in control will require prior SEBI Board approval, routed through the exchange where the broker is a member.
Legal experts say the centralized approval process will enhance oversight and investor protection by strengthening governance around ownership transitions. Brokers must also promptly report any material changes from their original registration details.
Codified Core Duties
The draft formally incorporates long-standing compliance norms, such as:
- Segregation and upstreaming of client funds and collateral
- Strong KYC and order evidence standards
- Confidentiality of client data
- Mandatory participation in SEBI’s Online Dispute Resolution platform
Qualified Stock Broker (QSB) Tag
QSB status will be determined by five measurable parameters: active clients, client assets, trading volumes, end-of-day margin obligations, and proprietary volumes. Qualitative compliance scores will no longer be entry criteria.
Inspections & Flexibility
Regulators — including exchanges, clearing corporations, and depositories — will have explicit powers for inspections, with scope for joint reviews to reduce duplication. SEBI will retain limited power to grant relaxations in cases of technical or procedural hardship or sector-specific irrelevance.
Updated Fee Structure
Fee schedules will be modernized by removing outdated 1990s references, with collections routed through exchanges and interest levied for delays.
