4 months ago
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Markets regulator Securities and Exchange Board of India (SEBI) connected Wednesday (February 4, 2026) projected a broad overhaul of the 'fit and due person' model governing marketplace intermediaries, aiming to bring greater procedural clarity and fairness to the regulatory process.
In its consultation paper, SEBI has suggested amendments to Schedule II of the Intermediaries Regulations, 2008, which woody with the 'Fit and Proper Person' criteria applicable to intermediaries, their cardinal absorption unit (KMPs), and persons successful control.
Under this, the regulator has projected to intelligibly codify the close to a hearing, refine the scope of disqualifying events, and trim regulatory uncertainty for applicants and intermediaries.
The regulator has recommended to abolish the notation to initiation of winding-up proceedings arsenic a disqualification successful a bid to guarantee that lone a last winding-up order, and not specified initiation of proceedings, is considered portion assessing whether a idiosyncratic is acceptable and proper.
Also, SEBI is looking to explicitly see the close to a proceeding successful the regulations. Although the signifier of giving a tenable accidental of being heard already exists, it has been projected to beryllium intelligibly stated successful the rules to region immoderate procedural ambiguity.
Accordingly, a caller clause has been proposed, which requires intermediaries oregon applicants to pass SEBI wrong 7 days if immoderate disqualifying lawsuit occurs, and clarify that a idiosyncratic tin beryllium declared 'not acceptable and proper' lone aft being fixed a tenable accidental of being heard.
"The work to pass SEBI astir the occurrence of immoderate lawsuit successful respect of KMPs oregon the Persons successful Control shall besides beryllium with the applicant oregon intermediary arsenic they are applying oregon holding the certificate of registration with SEBI," the regulator proposed.
The regulator has recommended to region the default five-year ineligibility play for applying for registration erstwhile nary clip play is specified successful SEBI's order. Going forward, the ineligibility volition use lone for the play mentioned successful the order.
In addition, the play during which a registration exertion is not considered aft issuance of a show-cause announcement (SCN) is projected to beryllium reduced from 1 twelvemonth to six months, to debar prolonged uncertainty for applicants.
SEBI has projected changes to Clause 6 relating to associates, radical entities, and persons successful control. The amendments clarify that disqualifications of radical entities volition impact an intermediary lone if SEBI formally declares specified persons arsenic not acceptable and proper. Further, intermediaries indispensable regenerate disqualified KMPs wrong 30 days of specified declaration.
The regulator has suggested removing the mandatory request for divestment of shareholding by persons successful power who are declared not acceptable and proper.
Instead, specified persons should lone beryllium restricted from exercising voting rights, portion retaining their economical ownership. This alteration aims to forestall irreversible fiscal nonaccomplishment successful cases wherever individuals are aboriginal cleared of wrongdoing. The SEBI has sought nationalist comments till February 25, 2026 connected the proposals.
