SEBI proposes overhaul of certification of associated person framework

SEBI proposes overhaul of certification of associated person framework; wider the definition but tighter exemption norms

Securities and Exchange Board of India (SEBI) has floated a consultation paper proposing amendments to the SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007, better known across industry as the CAPSM Regulations. The objective is to modernise the certification architecture applicable to individuals associated with securities market intermediaries, expand eligibility to newer categories, and tighten loopholes that were increasingly being misused under legacy exemption provisions.

One of the biggest moves proposed is the expansion of the very definition of “Associated Person”. SEBI wants this to be more broad-based, to cover not only principals or employees of intermediaries, agents, distributors and other natural persons engaged in securities business, but also include regulated entities as well as persons 'intending to be engaged' in the securities market, directly or indirectly.

SEBI has given rationale for the same, SEBI paper stated that “Certain persons associated with securities market are not specifically/explicitly covered within the definition of “Associated person”. This inclusion is deliberate as with emergence of new categories of market participants and newer products, SEBI believes certification and minimum standards must not be restricted to classical intermediary-linked staff only.

This also opens a formal track for young students seeking capital markets careers, making them eligible to start pre-engagement certification and improve employability in advance. SEBI paper noted, “Further to attract the new generation to participate in securities markets and to enhance their employability, it is proposed to include the words ‘intending to be engaged in the securities market” in the definition of associated person so that more students can participate in the securities markets”

The regulator is also proposing that longer-term NISM courses three months or more in classroom, online or hybrid mode should become a valid mode of obtaining NISM certification and Continuing Professional Education (CPE). As per SEBI paper currently most certifications are examination-led and short-cycle. SEBI says long duration coursework will add depth and value, and aid genuine capacity building. In parallel, electronic mode must also be allowed for CPE participation to widen reach and convenience.

The third critical reform is in exemptions. The original 2007 framework had carved out exemption routes for 'Principal', individuals above 50 years at time of notification and those with 10+ years of market experience.

Over the years, NISM feedback to SEBI is that this block became one of the most abused areas, with intermediaries issuing “letters of designation” simply to get people into exemption buckets even when they did not truly meet the condition.

SEBI now proposes to remove this exemption category structure entirely and replace it by a new single combined criterion, minimum age 50 plus minimum 10 years of relevant domain experience as on date of examination / CPE. This creates a far more objective and auditable condition and removes subjective interpretative designation arbitrage. SEBI has sought public comments on the proposal till November 27, 2025.