The Securities and Exchange Board of India (SEBI) is proposing an amendment to its Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007 (CAPS Regulations). The primary objective is to streamline the process of specifying certification requirements for “associated persons” in the securities market. Currently, these requirements, including categories of personnel, necessary certifications, and timelines, are mandated through Notifications in the Official Gazette. SEBI now seeks to shift this to a more agile system by issuing these specifications via Circulars. This change aims to leverage the wide and immediate dissemination capabilities of digital media, making updates more efficient compared to the traditional Gazette publication. The proposal also includes omitting specific timelines from the regulations themselves, allowing SEBI to set varying timelines through circulars for different categories of associated persons. This procedural change, which SEBI believes does not constitute a substantive policy change, will simplify regulatory updates and ensure prompt communication to stakeholders without requiring public consultation. The Board’s approval is sought for these amendments to regulations 3, 4, and 6 of the CAPS Regulations.

Securities and Exchange Board of India

Proposal to amend the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007 to specify the certification requirements in relation to associated persons through a Circular instead of a Notification in the Official Gazette

1. Objective

1.1. This Memorandum seeks the approval of the Board to amend the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007 (hereinafter referred to as “CAPS Regulations”) for specifying the certification requirements in relation to ‘associated persons’ of intermediaries through a ‘Circular’ instead of a ‘Notification in the Official Gazette’ as is presently required under regulation 3 of the said Regulations and also for consequential changes thereto.

2. Background

2.1. The CAPS Regulations (Annexure-A) were notified on October 17, 2007. Clause (c) of sub-regulation (1) of regulation 2 of the CAPS Regulations defines the expression “associated person” to mean a principal or employee of an intermediary or an agent or distributor or other natural person engaged in the securities business and includes an employee of a foreign portfolio investor or a foreign venture capital investor working in India.

2.2. Sub-regulation (1) of regulation 3 of the CAPS Regulations inter alia empowers the Board to require, from a specified date, such categories of associated persons to obtain the requisite certificate for engagement or employment with such classes of intermediaries. The provision further states that the specification with respect to the –

2.2.1. categories of associated persons,

2.2.2. requisite certification for engagement or employment with such classes of intermediaries, and

2.2.3. timeline for obtaining such certification, may be done through a Notification in the Official Gazette.

2.3. The proviso to sub-regulation (1) of regulation 3 provides that an associated person employed or engaged by an intermediary prior to the date specified by the Board may continue to be employed or engaged by the intermediary if he obtains the certificate within two years from the said date. Further, sub-regulation (2) of regulation 3 provides that an associated person on being employed or engaged by an intermediary on or after the date specified by the Board, shall obtain such certificate within one year from the date of being employed or engaged with the intermediary.

2.4. This Memorandum proposes to –

2.4.1. amend regulation 3 to specify –

2.4.1.1. the requirements therein through a Circular instead of a Notification in the Official Gazette; and

2.4.1.2. the timelines for obtaining such certification for existing/newly appointed employees of intermediaries by way of a Circular.

2.4.2. make consequential/incidental changes to regulations 4 and 6 of the CAPS Regulations.

3. Issuance of notification in the Official Gazette vis-à-vis issuance/ incorporation in Circulars/Master Circulars.

3.1. Notification in the Official Gazette – legal requirement

3.1.1. The CAPS Regulations had been made by the Board in exercise of the powers conferred by section 30 read with sections 11, 12 and 19 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”).

3.1.2.  The mandate to ‘notify’ the requirements in the Official Gazette arises from regulation 3 of CAPS Regulations and not from the SEBI Act. Reference in this context is made to sections 29 and 30 of the SEBI Act read with section 2(1)(f) thereof, which requires that Rules and Regulations can be made under the said Act by notification published in the Official Gazette. Hence, the SEBI Act does not require that subordinate instructions like guidelines, scheme or circulars to be made by a notification in the Official Gazette.

3.1.3. Where the parent statute is silent, but the subordinate legislation itselfprovides for a  manner of publication, such a mode of publication is sufficient. Hence, issuance of a Circular by SEBI pursuant to an anchor provision in the concerned regulation would be sufficient for the purposes of, inter alia, specifying the categories of associated persons, the requisite certificates to be obtained by associated persons for being employed or continued to be employed by such classes of intermediaries, and the time frame for obtaining the certificates.

3.1.4. When the CAPS Regulations were considered and approved by the Board prior to its notification in the year 2007, the related Board Memorandum (Annexure-B) did not articulate the reasons for requiring a ‘Notification to be published in Official Gazette’ for inter alia specifying matters under Regulation 3 thereof.

3.2. Specifying the certification requirements and the timelines by a Circular

3.2.1. In 2007, when the CAPS Regulations were brought into force, the penetration of digital media and internet were at a nascent stage. Thus, at that point in time, a notification in the Official Gazette, might have been felt necessary for dissemination to the public at large and the market. However, in the present times, a Circular placed by SEBI in its website gets immediate and wide media coverage. Further, such Circular is also addressed to Market Infrastructure Institutions/Association of Mutual Funds in India/Administrative and supervisory bodies (in case of Investment Advisors and Research Advisors)/Industry Associations, etc., inter alia, for dissemination to the concerned stakeholders. Hence, a circular would achieve the desired results of a Notification in an expeditious manner.

3.2.2. Thus, the issuance of Circulars/incorporation of provisions in the Master Circulars with respect to certifications to be undertaken by the associated persons would achieve the purpose of wide and swift publicity, particularly to the concerned intermediaries and their associated persons.

3.2.3. A ‘Circular’ issued by SEBI has the force of law and is a ‘measure’ in terms of section 11(1) and (2) of the SEBI Act. SEBI is empowered to issue a Circular to specify the means to comply with a particular regulatory requirement or the procedure thereunder. Such a Circular can be said to be the ‘direction’ of the Board and failure to comply with such Circular may, if deemed necessary, be visited with monetary penalty under section 15HB of the SEBI Act. The mandate(s) issued through a Circular also provides the necessary flexibility to revise/amend such Circular on account of any emergent/expedient situation.

3.2.4. As regards the specification of timelines for obtaining certifications by way of a circular, it may be noted that the provisions of CAPS Regulations specifically lay down the timelines for the existing employees (two years) and newly appointed employees (one year) to obtain certifications. However, it is proposed to omit the said timelines from the CAPS regulations so as to enable SEBI to specify different set of timelines through circulars for associated persons of different categories of intermediaries.

4. Suggested amendments

4.1. In view of the foregoing, it is proposed to amend regulation 3 of the CAPS Regulations–

4.1.1. to do away with the requirement of issuance of a Notification in the Official Gazette under regulation 3(1) of CAPS Regulations and instead provide for the same by a circular;

4.1.2. to enable the Board to specify the timelines for obtaining the necessarycerti fication in relation to associated persons through a circular and accordingly omit the proviso to sub-regulation (1) of regulation 3 and sub-regulation (2) thereof; and

4.1.3. to make consequential changes to regulations 4 and 6 of the CAPS Regulations.

4.2. The proposed amendments to the CAPS Regulations is placed at Annexure-C and the draft amendment notification to the CAPS Regulations is placed at Annexure-D.

5. Public consultation

5.1. Reference is made to the Securities and Exchange Board of India (Procedure for making, amending and reviewing of Regulations) Regulations, 2025, which inter alia requires ‘public consultation’ for the purpose of making regulations or making amendments to existing regulations. However, regulation 9 thereof provides for the non-applicability of the said regulations on certain matters. The said provision is reproduced below:

“9. Non-applicability on certain matters

(1) Notwithstanding anything contained in these regulations, the provisions of these regulations shall not be applicable to –

(a) the internal organizational matters of the Board, including those governing the conduct of its meetings, administration and service conditions of its officers and employees;

(b) regulations that only relate to procedural requirements or that which in the opinion of the Chairperson do not result in any substantive policy changes;

(c) any amendment to these regulations; and

(d) proposals for which public comments have already been sought or received or to those regulations which are approved by the Board but not yet notified, prior to the coming into force of these regulations.

(2) The Board shall be informed of matters where the procedure laid down in these regulations is not made applicable in terms of sub-regulation (1)”

5.2. As the present proposal only deals with the procedural aspects under the CAPS Regulations and does not involve substantive changes, public consultation has been dispensed with in terms of clause (b) of sub-regulation (1) of regulation 9 of the aforesaid regulations. In terms of sub-regulation (2) of regulation 9, the Board is accordingly informed of the same.

6. Proposal for consideration and approval of the Board

6.1. The Board is therefore requested to consider and approve-

6.1.1.  the proposed amendments to regulation 3 –

6.1.1.1. to specify the certification requirements for associated persons through a Circular, instead of issuing a Notification in the Official Gazette; and

6.1.1.2. to enable the Board to specify the timelines for obtaining the necessary certification in relation to associated persons through a Circular,

6.1.2. the consequential/incidental changes to regulations 4 and 6 of the CAPS Regulations;

as placed at Annexure-C

6.2. The Board is accordingly requested to authorise the Chairman to carry out suitable amendments to the regulations and to take any other consequential or incidental steps for implementation of the decisions of the Board.

Annexure ‘A’

The regulations are available on the website of Securities and Exchange Board of

India at www.sebi.gov.in.

Annexure ‘B’

(This has been excised)

Annexure ‘C’

(Amendments shall be notified after following the due process)

Annexure ‘D’

(Amendments shall be notified after following the due process)

Source: SEBI Board meeting 18th June 2025: https://www.sebi.gov.in/sebiweb/about/AboutAction.do?doBoardMeeting=yes#