SEBI board approves revamp of stockbroker regulations; replaces 1992 framework

This would be the fourth board meeting chaired by Sebi chief Tuhin Kanta Pandey who assumed office on March 1.

SEBI’s board on Wednesday approved a comprehensive revamp of the stockbroker regulatory framework, replacing the three-decade-old SEBI (Stock Brokers) Regulations, 1992 with the SEBI (Stock Brokers) Regulations, 2025, aimed at modernising market practices, simplifying compliance and bringing clarity to evolving trading models.

The overhaul introduces a formal definition of algorithmic trading, clearer norms for proprietary trading, and a regulatory framework for execution-only platforms (EOPs) that facilitate direct mutual fund transactions. Key definitions -- including clearing member, professional clearing member, proprietary trading member, proprietary trading and designated director -- have also been updated to remove ambiguity and reflect contemporary market structures.

SEBI has consolidated provisions that were earlier scattered across circulars and remove repetitive or obsolete requirements that no longer align with current market realities. The new regulations have been reorganised into 11 chapters, covering all critical aspects of stockbroker regulation.

SEBI Chairman Tuhin Kanta Pandey said the first objective of the overhaul was the “active removal of repetitive and redundant provisions” and alignment with other regulatory frameworks. He said the regulations now explicitly recognise off-right payment obligations applicable to stockbrokers, including provisions related to protection of client funds and securities, risk management, internal controls, and compliance with the cybersecurity and cyber-resilience framework.

Compliance has been eased through measures such as enabling joint inspections, allowing electronic maintenance of books of accounts, and rationalising reporting requirements. Stock exchanges have been designated as first-line regulators for stockbrokers, with revised norms for reporting non-compliance, submission of financial statements, and disclosure of the place of maintenance of books of accounts to exchanges.

The board has also approved the rationalisation of criteria for identifying qualified stock brokers, with enhanced supervision to focus on brokers with larger client bases and higher trading volumes, aligning regulatory oversight with scale and risk.

Earlier, on August 13, SEBI had released a consultation paper proposing a comprehensive review of the stockbroker regulations, noting that rapid growth in algorithmic trading, digital platforms and proprietary trading strategies had outpaced definitions and compliance norms framed more than three decades ago.

Pandey said the regulator had received around 702 comments on the draft regulations and that all feedback and suggestions were carefully examined before finalising the framework.