The review proposes replacing the SEBI (Stock Brokers) Regulations, 1992 with the SEBI (Stock Brokers) Regulations, 2025 to modernise and simplify the regulatory framework in line with evolving market practices and the Union Budget 2023–24 emphasis on ease of compliance. Initiated by Securities and Exchange Board of India, the overhaul follows extensive consultations involving a Working Group, the Intermediary Advisory Committee, and public stakeholders, generating over 700 comments. The proposed regulations streamline language and structure, consolidate schedules into chapters, remove redundant provisions, and align requirements with other securities and corporate laws. Key changes include clearer definitions, simplified registration and exit mechanisms, electronic record-keeping, rationalised inspection and enforcement processes, and updated obligations on risk management, investor protection, cyber security, and fraud prevention. Provisions are also aligned with PMLA timelines, Companies Act record-retention norms, and contemporary supervisory practices, while operational forms are shifted to circulars for flexibility. Overall, the reforms aim to reduce compliance costs, enhance clarity, strengthen governance, and preserve investor protection.
Also Read: Minutes of SEBI Board Meeting Dated: 17th December 2025
Securities and Exchange Board of India
Review of Securities and Exchange Board of India (Stock Brokers) Regulations, 1992
1. Objective
1.1. This memorandum seeks approval of the Board to replace SEBI (Stock Brokers) Regulations, 1992 with SEBI (Stock Brokers) Regulations, 2025 for bringing in regulatory changes along with simplified drafting commensurate with the continually evolving nature of regulatory landscape and requirement of ease of compliance.
2. Background
2.1. SEBI (Stock Brokers) Regulations, 1992 (hereinafter referred as the “SB Regulations”) were notified on October 23, 1992 which laid down the regulatory framework for stock brokers (“brokers”). The said Regulations, inter-alia, provide for eligibility, procedure and conditions of registration, general obligations & responsibilities of brokers, etc., some of which already reflected in the Securities Contracts (Regulation) Act, 1956 (“SCRA”).
2.2. Considerable time has elapsed since the implementation of SB Regulations in 1992. There have been several changes in the compliance requirements for brokers due to the dynamic and evolving nature of the stock broking business.
2.3. In the Union Budget for financial year 2023-24, one of the budget announcements was made as under:
“To simplify, ease and reduce cost of compliance, financial sector regulators will be requested to carry out a comprehensive review of existing regulations. For this, they will consider suggestions from public and regulated entities
2.4. A need was thus felt to review and realign the SB regulations with these developments to accommodate the regulatory landscape and market practices which have evolved over time.
2.5. SEBI constituted a Working Group (WG) comprising of broker representatives, legal experts, academicians and representative of investor associations. Representatives of stock exchanges were also part of the WG.
The objective was to simplify, ease compliance and reduce cost of compliance, while effectively balancing investor protection, to build trust in the stock broking industry, and to also facilitate its developments and growth.
2.6. The WG held 10 meetings with detailed discussions on the various aspects of the SB Regulations. The WG provided a set of recommendations with particular regard to the following:
a. Simplify the language of the regulations to bring clarity and remove ambiguity, if any;
b. Amend the regulations to remove inconsistency and bring parity with sub-regulations within the same regulations and also with other capital market intermediary regulations.
c. Omit regulations which have become redundant; and
d. Incorporate changes/new requirements which have occurred due to change in market practices and regulatory environment.
2.7. The WG recommendations were subsequently discussed internally and in the Intermediary Advisory Committee (“IAC”) comprising of market infrastructure institutions, Exchanges, broker representatives, legal experts, academicians and representative of investor associations. The IAC while was in broad agreement with the proposals, it was decided that the broker associations and exchanges shall discuss the proposals threadbare and take it forward. Thereafter the discussions took place on 2 occasions and separately with the representatives of the broker associations.
3. Public Consultation
3.1. Based on the discussions in the forum, Consultation Paper was issued on August 13, 2025 (Annexure –A) for public comments to be submitted latest by September 03, 2025.
3.2. Around 702 comments on various provisions of the draft regulations were received from various stakeholders including investors, stock brokers, stock broker’s associations, stock exchanges, clearing corporations and law firms.
3.3. While majority of the comments are broadly in support of the proposals in the Consultation Paper, several suggestions on the provisions of the proposed regulations have also been received from these entities. Most of the comments submitted by the broker associations were descriptive in nature. While submitting the comments, most of the commentators did not select the category ‘agree’, ‘strongly agree’ ‘disagree’, ‘strongly disagree’ and ‘partially agree’.
3.4. Comments in detail of all the stakeholders are placed at Annexure-B. The summary of the comments, SEBI’s analysis and response have been placed at Annexure C.
3.5. Some of the suggestions received are as follows:
3.5.1 Suggestions to have clearer definitions of certain terms like clearing member, professional clearing member, proprietary trading member, employees;
3.5.2 Suggestions to link the definitions to the parent regulations where such definitions are provided;
3.5.3 Suggestions to lay down the responsibility on the stock broker to have adequate systems for surveillance of trading activities and internal control systems;
3.5.4 Suggestions to align the timeline for reporting of suspicious activity with Prevention of Money-Laundering (Maintenance of Records) Rules, 2005;
3.5.5 Suggestions to remove duplicate/repetitive provisions and ambiguities.
3.6. After reviewing and analysing the public comments, discussions were held with industry stakeholders again to address their comments and proposals. Most of the proposals made by these broker associations have been suitably addressed.
3.7. The only relevant suggestion made by the broker associations which has not been accepted is the renaming of the regulations. The associations had sought the name of the regulations to be SEBI (Trading and Clearing Member) Regulations. This has not been accepted since SCRA uses the term ‘stock broker’ and so does regulation 12 of the SEBI Act 1992. It may be mentioned that one cannot carry on the activity of a trading member or a clearing member (other than as a professional clearing member), without one being a stock broker. Further changes in the name would entail changes in the SCRA as well as the SEBI Act, when there is no marginal utility.
4. Proposed regulatory changes
4.1. During such a review and further internal deliberations, certain additional changes were considered, even though they were not part of the Consultation Paper, to specifically cater to the views expressed in the public comments that the regulations could benefit from simplification of language, clearer definitions and streamlined structure.
4.2. Resultantly the proposed changes include the following-
4.2.1. Streamlining the regulations to ensure that the language remains simple and clear, enhancing the ease of understanding.
4.2.2. Modification and inclusion of certain provisions to provide more clarity, ease of compliance and ease of doing business.
4.2.3. Omission of repetitive, redundant provisions and alignment with other regulations.
4.2.4. Updating the regulations with contemporary changes.
4.2.5. Omission of forms which may be prescribed by way of circular.
4.3. The changes in provisions have been detailed in Annexure D and major changes have been discussed in brief in the subsequent paragraphs.
4.3.1. Streamlining the regulations to ensure that the language remains simple and clear, enhancing the ease of understanding.
4.3.1.1 The draft Regulations have been organized into eleven chapters, systematically covering all the critical elements of the regulatory framework for stock brokers. The reporting responsibilities have been changed to account for the stock exchanges as the first line regulators for stock brokers
4.3.1.2 The overall structure has been streamlined by deletion of duplicate or repetitive provisions, re-arrangement and consolidation of provisions to have a harmonized structure.
4.3.1.3 Schedules are deleted and integrated as chapters in the regulations. Placing these as chapters in the regulations enhances ease of readability and understanding.
(a) Schedule II which prescribes the Code of Conduct has now been included as a separate Chapter in the Regulations. Any breach can now be directly and immediately addressed through the established legal framework.
(b) Schedule V and VI on fees, deposit and net worth respectively has now been included as separate Chapters in the Regulations.
(c) Schedule III on fees has been omitted as the same has become redundant.
4.3.1.4 The Provisions applicable to stock broker acting as an underwriter are proposed to be re-arranged and consolidated.
4.3.1.5 Provisions of the extant code of conduct are proposed to be rearranged, consolidated, simplified and divided into the following sections-
i. General principles—Integrity; Diligence, honesty, fairness; Competence.
ii. Duties to clients.
iii. Conflict of interest.
iv. Duties when acting as underwriter
4.3.1.6 Provisions for the past period which are no longer applicable have been removed.
4.3.2. Modification and inclusion of certain provisions to provide clarity, ease of compliance and ease of doing business.
4.3.2.1 Following definitions are proposed to be modified/included to provide clarity –
a. Proprietary trading – included to bring clarity in own trading and trading on behalf of clients.
b. Proprietary trading member- modified to mean that proprietary trading can be undertaken in any specific segment. Circular reference deleted.
c. Professional Clearing member (PCM)-modified to clarify that PCM shall not have trading rights in the same segment for which it is acting as clearing member.
d. Designated Director – modified to explicitly state who can be a designated director in relation to the stock broking activity. ‘Principal officer’ replaced by Designated director.
e. Specified – defined the term ‘specified’ to remove repetition of the words ‘as specified by Board or stock exchanges’ used throughout the regulations.
4.3.2.2 The following provisions are proposed to be modified to provide more clarity:
a. Employees – definition of employees is proposed to be removed so that the term takes its natural meaning. Wherever specific provision requires director, partner etc. to be included as employee, it has been included in that provision.
b. Requirement of past experience for registration – To align with requirements under Securities Contracts (Regulations) Rules, 1957 (SCRR), the applicant is proposed to have an experience of atleast 2 years,
c. Registration of clearing members – The provisions applicable to a stock broker is proposed to be applicable mutatis mutandis to a clearing member.
d. Surrender of certificate of registration – This provision is proposed to be added in the regulations, to allow a stock broker to exit. Presently this was being administratively addressed.
e. Responsibility of compliance officer – Reference to Securities Contracts (Regulation) Act, 1956 and regulatory provisions of stock exchanges added. Any non-compliance is now proposed to be reported to stock exchange.
f. Power to remove difficulties – It is proposed to enable the Board to issue guidelines for removing difficulties.
4.3.2.3 Modifications of certain provisions to provide for ease of compliance and ease of doing business
a. Parameters to qualify as qualified stock broker (QSB)- The criteria of compliance score and grievance redressal score are proposed to be removed as eligibility criteria for QSB. The said criteria are, in essence, aspects on which brokers are monitored and are not necessarily eligibility criteria.
b. Procedure for inspection – An enabling provision is proposed for joint inspection by the Board along with recognized stock exchanges, clearing corporations and depositories. This will result in focussed inspections by MIIs and to avoid repeated and multiple overlapping inspections.
c. Exemption from enforcement of the regulations in special cases– It is proposed to remove the 12 months’ time period and flexibility is being granted to the applicant for testing of products if the Board is of the opinion that additional time is required.
d. Other permitted activities – An enabling provision is proposed to be added to permit stock brokers to carry out activities under the regulatory framework of other financial regulators or any other specified authority, which may be undertaken through a Separate Business Unit (SBU). The provisions pertaining to SBU have already been separately specified through Circulars.
e. Institutional mechanism for prevention and detection of fraud or market abuse
i. In order to appropriately address the public comments, the responsibility for setting up of adequate systems for surveillance of trading activities and internal control systems on the stock broker is proposed to be provided for.
ii. Duplicity is proposed to be removed in certain clauses by merging certain provisions. For example, a provision under the head ‘Risk Management and internal control’ requires the stock broker to adhere to the SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011. Given this, the provisions relating to having KYC Surveillance Systems is no longer required.
iii. It is proposed to align the time period for reporting of suspicious transactions with the Prevention of Money Laundering Act, 2002 (PMLA).
iv. Accountability is proposed to be fixed on the Board of Directors and Audit committee or persons of other equivalent or analogous rank of the stock broker to be responsible for enforcing the provisions of this chapter.
f. Maintenance of books of accounts, records etc. by stock brokers – It is proposed that in view of the advent of technological developments, books of accounts, records and contract notes can be maintained in electronic form also.
4.3.3. Omission of repetitive, redundant provisions and alignment with other regulations
a. Definitions of Clearing Member and Self-clearing member – proposed to be modified to simplify the language and to omit the reference to clearing in the commodities segment.
b. Definition of ‘Small Investors’ – The definition of small investor is proposed to be deleted. The regulations do not make any specific provisions for small investors, thus defining the category of investor on the basis of volume of business is no more relevant.
c. Execution only platform (EOP)- The definition of EOP is proposed to be included in the Regulations, which was earlier only in the circular.
d. Requirement for designated director to be residing in India – It is proposed that the stock broker shall have at least one designated director, who stays in India for a total period of not less than one hundred and eighty-two days during the financial year. This will facilitate enhanced governance and implementation of compliance requirements.
e. The definitions of ‘regulations’, ‘stock exchanges’ and key managerial personnel’ are proposed to be deleted as they are covered under the residuary definition which reference the terms not defined under SB regulations to have the meaning assigned to them under the respective acts, regulations, such as under Companies Act, Securities Contracts (Regulation) Act, 1956 etc., governing such entities.
f. Definitions such as change in control, issue, fraud and market abuse are proposed to be modified to align with their reference in the respective regulations.
g. Material change – For ease of compliance and for better clarity the term ‘material change’ is proposed to be explained.
h. Incidental advice – To provide clarity on compliances related to incidental advice, stock broker is permitted to give incidental advice in terms of Chapter III of the SEBI (Investment Advisors) Regulations, 2013.
i. Period for maintenance of books of accounts – The period for maintenance of books of accounts is proposed to be aligned with the period specified in Companies Act, 2013 and SEBI (Depositories and Participants) Regulations, 2018 to make it 8 years.
j. Procedure for action in case of default – The actions i.e. monetary penalty, suspension/cancellation of registration, prosecution, etc as a consequence for any violations of the regulations are already specified under the relevant provisions of the Securities Contracts (Regulation) Act, 1956, SEBI Act, Rules and Regulations framed thereunder. The provisions here are redundant and thus proposed to be removed.
Further, the list of violations is proposed to be rationalised to remove the reference to provisions which are already covered elsewhere in the obligations and responsibility part of regulations, conditions of registrations/ circulars. For example:
a. Failure to maintain books of account or records as per the Act, rules or regulations framed there under;
b. Failure to redress the grievances of investors within 30 days of receipts of notice from the Board;
c. Failure to pay fee as per Schedule III of these regulations (covered under conditions of registration).
k. Power to relax strict enforcement of the regulations – An enabling provision to give the Board the power to relax strict enforcement of the regulations in certain scenarios is proposed to be included as is present in other regulations.
i. Payment of fees and recovery – The provision on payment of interest in case of default in payment of fee by stock broker/ clearing member /self-clearing member is proposed to be modified from the existing interest rate of 15% per annum to 1% for every month or part of a month, in accordance with Section 28A of SEBI Act, 1992 read with section 220(2) of Income Tax Act, 1961.
m. Provisions related to sub-brokers, physical delivery of shares are proposed to be deleted as the same have become redundant.
4.3.4. Updating the regulations with the contemporary changes that have taken place in the last few years
(a) Obligations and responsibilities – In order to protect the interest of investors in securities and to promote the development of and to regulate the securities market, the Board and stock exchanges have issued certain compliance requirements towards monitoring and supervision of the stock brokers. The major principles of compliance requirements applicable to the stock brokers have been included in these regulations. It is clarified that these requirements have already been specified in detail through circulars and no new requirements have been specified in the regulations. Some of the obligations which are proposed to be inserted in the regulations includes obligations related to –
a. protection of client’s funds and securities;
b. risk management and internal control;
c. compliance with cyber security and cyber resilience framework;
d. redressal of grievances;
e. compliance with code of advertisement;
f. compliance with outsourcing guidelines;
g. compliance with investor charter.
(b) Activities restricted/prohibited for stock brokers – Restrictions/prohibitions are proposed to be specifically spelt out. Such prohibited activities include engaging in fixed return schemes, accepting cash from clients, unauthorised collective investments/portfolio management, activity not permitted under Rule 8(1)(f) and Rule 8(3)(f) of Securities Contracts (Regulation) Rules, 1957.
4.3.5. Omission of forms which may be prescribed by way of circular Schedule I –Forms-The Schedule prescribes the forms for Registration as Stock Broker (Form A), as Clearing Member (Form AD) and as a stock broker/ proprietary trading member/ clearing member. Form E pertaining to Certificate of Registration for sub- broker is redundant. It is proposed to move the forms out of the Schedules since forms are operational in nature and may need to undergo frequent updates due to changes in law, technology, policy or minor administrative requirements. Such forms will be prescribed by Board or recognised stock exchange by way of circular. In this regard, it is proposed to clarify that such a form shall be standardised by recognised stock exchanges based on the recommendation of Industry Standard Forum (ISF) and shall be specified only after due consultation with SEBI. The requirement to seek recommendations of ISF by stock exchanges will be specified through a circular.
4.3.6. Repeal and saving
A provision on repeal and saving is proposed to be added in the ‘miscellaneous’ chapter to ensure legal continuity and stability of the proceedings under the old regulations and the new regulations.
5. Proposal for consideration and approval of the Board:
The Board is requested to:
a. consider and approve the proposals stated at paragraph 4 above and the consequent draft SEBI (Stock Brokers) Regulations, 2025, placed at Annexure E to this memorandum.
b. authorize the Chairperson to take necessary steps to implement the proposals including notification of amendments, issuing circulars, wherever necessary with consequential and appropriate changes, as may be required.
Encl:
Annexure-A – Consultation Paper on Review of SEBI (Stock Brokers), Regulations 1992
Annexure-B – Public comments
Annexure-C – Summary of comments
Annexure-D – Changes in the provisions
Annexure-E – Proposed draft stock brokers Regulations
Annexure-A
(Available on SEBI Website www.sebi.gov.in under the head “Reports & Statistics”>>”Reports”>>”Reports for Public Comments”)
Annexure-B (This has been excised for reasons of confidentiality.)
Annexure-C (This has been excised for reasons of confidentiality.)
Annexure-D (Amendments shall be notified after following the due process.)
Annexure-E (Amendments shall be notified after following the due process.)
Read Also:-
Source: www.taxguru.in