Stricter Compliance and Surveillance Mandated for Brokers by SEBI

The Securities and Exchange Board of India notified the SEBI (Stock Brokers) Regulations, 2026 on 7 January 2026, overhauling the regulatory framework governing stock brokers and clearing members and repealing the 1992 regulations. The regulations consolidate rules on registration, eligibility, net worth, deposits, fees, and operational permissions across market segments, while clarifying when separate registrations are not required. They impose comprehensive general and enhanced obligations, including client fund and securities protection, robust risk management, cybersecurity resilience, grievance redressal, record-keeping for eight years, and strict codes of conduct. A dedicated chapter introduces institutional mechanisms to prevent, detect, and report fraud or market abuse, including surveillance systems, mule-account detection, whistle-blower protections, and periodic reporting. SEBI’s inspection, investigation, and enforcement powers are strengthened, alongside graded actions for defaults. The framework also enables regulatory sandbox relaxations to foster innovation, specifies underwriting permissions and limits, and sets detailed fee, net-worth, and deposit requirements, ensuring stronger governance, investor protection, and market integrity.

SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 07th January, 2026

SECURITIES AND EXCHANGE BOARD OF INDIA (STOCK BROKERS) REGULATIONS, 2026
A regulation that embodies the regulatory framework for registration of stock brokers and clearing
members, specifying their operational and general obligations and responsibilities, and for matters connected therewith or incidental thereto.

No.SEBI/LAD-NRO/GN/2026/291– In exercise of the powers conferred by section 30 read with section 11(2) and section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations, namely –

CHAPTER I
PRELIMINARY

Short title and commencement.

1. (1) These regulations may be called the Securities and Exchange Board of India (Stock Brokers) Regulations, 2026.

(2) These regulations shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these regulations, unless the context otherwise requires, —

a. “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);

b. “certificate” means a certificate of registration issued by the Board;

b. “change in control” –

(i) in case of a body corporate –

A. whose shares are listed on any recognised stock exchange, shall be construed with reference to the definition of control in terms of regulation 2(1)(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

B. whose shares are not listed on any recognised stock exchange, shall be construed with reference to the definition of control as provided in Section 2(27) of the Companies Act, 2013 (18 of 2013);

(ii)  in a case other than that of a body corporate, shall be construed as any change in its legal formation or ownership or change in controlling interest.

Explanation – For the purpose of sub-clause (ii), the expression “controlling interest” means an interest to the extent of not less than fifty percent of voting rights or interest, either directly or indirectly;

(d)  “clearing corporation” shall mean a clearing corporation as defined in regulation 2(1)(d) of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018;

(e)“clearing member” means a person having clearing and settlement rights in any recognised clearing corporation;

(f) “designated director” shall mean a person designated as such by the stock broker or clearing member and shall include –

i. the managing director or a whole-time director duly authorized by the Board of Directors, if the entity is a company;

ii. the managing partner, if the entity is a partnership firm or a designated partner, if the entity is a Limited Liability Partnership;

iii. the proprietor, if the entity is a proprietorship concern; and

iv. such other person or class of persons as may be specified by the Board, if the stock broker or clearing member does not fall in any of the categories above;

(g) “Execution Only Platform” means any digital or online platform which facilitates transactions such as subscription, redemption and switch transactions in a direct plan of a scheme of a Mutual Fund;

(h) “form” means a form specified by the Board or recognized stock exchange;

(i) “fraud” or “fraudulent” shall have the meaning assigned to it under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003;

(j) “inspecting authority” means one or more persons appointed by the Board to exercise powers conferred under Chapter V;

(k) “issue” shall have the meaning assigned to it under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992;

(l)  “market abuse” means a manipulative, fraudulent and unfair trade practice including through a mule account which may contravene any of the provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 or the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 or Section 12A of the Act;

(m) “mule account” shall have the meaning assigned to it under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003;

(n) “professional clearing member” means a clearing member without having the trading rights in the same segment of any of the recognised stock exchange for which it is acting as a clearing member.;

(o)“proprietary trading” means trading by a stockbroker in its own account, in any segment of a recognised stock exchange;

(p)“proprietary trading member” means a stock broker whose trades are exclusively in the nature of proprietary trading;

(q) “qualified stock broker” means a stock broker designated as such under regulation 19;

(r) “regulatory sandbox” means a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market;

s. “Securities Contract (Regulation) Act” means Securities Contract (Regulation) Act, 1956 (42 of 1956);

t. “self-clearing member” means a clearing member who settles trades on its own account or of its clients;

u. “senior management” shall have the meaning assigned to it under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015;

v. “specified” means as specified by the Board or a recognised stock exchange in consultation with the Board, unless otherwise stated;

w. “stock broker” means a person having trading rights in any recognised stock exchange and includes a trading member;

x. “suspicious activity” shall mean any fraudulent activity in respect of know your client requirements, order placement or trading activity;

y. “underwriter” means a person who engages in the business of underwriting of an issue of securities of a body corporate;

z. “underwriting” means an agreement to subscribe to or to procure subscription for securities which remain unsubscribed after being issued or offered for sale.

(2) Words and expressions used and not defined in these regulations but defined in the Act, the Companies Act, 2013, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those Acts, rules or regulations made thereunder or any statutory modification or re-enactment thereto, as the case may be.

Applicability of provisions to clearing member and certain clarifications.

3. (1) A stock broker registered with the Board does not need a separate registration to act as a clearing member in any segment of the clearing corporation subject to the approval of such clearing corporation.

2. A clearing member registered with the Board does not need a separate registration to act as a stock broker in any segment of the recognised stock exchange subject to the approval of such recognised stock exchange.

3. Separate registration as a clearing member shall not be required for any person, who is registered with the limited purpose clearing corporation as a participant, for participating in the tri-party repo segment for undertaking proprietary trades in corporate bonds.

Explanation – For the purposes of these regulations, “participant” means any person who is an eligible entity as stipulated under the Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018.

4. The provisions of Chapters II, Chapter III, Chapter V, Chapter VI and Chapter VIII of these regulations other than provisions specified under regulation 13, regulation 14, regulation 15(5) and regulation 19 shall mutatis mutandis apply to a clearing member and any reference to a recognised stock exchange in that case shall be taken as reference to a clearing corporation.

CHAPTER II

REGISTRATION OF STOCK BROKERS

Application for registration.

4. (1) Any person who intends to act as a stock broker shall be required to submit an application to the Board through a recognised stock exchange either electronically or otherwise, in the form, along with the application fees as specified in Chapter IX.

2. The recognised stock exchange shall examine the eligibility of the applicant in terms of relevant Acts, Regulations (including these regulations) as well as the rules and bye-laws of the concerned recognised stock exchange.

3. After examination, the recognised stock exchange shall forward the application to the Board along with its recommendation within thirty days of receipt of the complete application with the application fees specified by Board.

4. A stock broker registered with the Board may operate in any recognised stock exchange or any segment of the recognised stock exchange subject to the approval of such recognised stock exchange.

Furnishing of information and clarification.

5. The Board may seek any information from the applicant or the recognised stock exchange and may require the applicant or its designated director to appear before the Board to furnish any information or clarifications to consider the application for grant of a certificate.

Consideration of application for grant of certificate.

6. (1) The Board shall take into account all matters which it deems relevant for grant of certificate.

(2) The Board may, in particular, examine whether the applicant–

a. is eligible to be admitted as a member of a recognised stock exchange;

b. has necessary infrastructure like adequate office space, equipment and manpower to effectively discharge its activities;

c. has experience of at least two years in the business of trading or dealing in securities, as the case may be;

d. has been subjected to disciplinary proceedings under the rules, and bye-laws of a recognised stock exchange as a stock broker involving either itself or any of its partners, directors, senior management, key managerial personnel or employees;

e. has been subjected to enforcement action under securities laws, with respect to its business as a stock broker involving either itself or any of its partners, directors, senior management, key managerial personnel or employees;

f. is a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;

g. has any financial liability which is due and payable in terms of the Act, the Securities Contracts (Regulation) Act, 1956 or rules and regulations made thereunder;

h. has obtained the relevant certification from National Institute of Securities Market or any other certification as may be specified;

i. satisfies the minimum net worth and deposit requirements; and

j. has 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.

(3)  An existing stock broker shall comply with the requirement specified under regulation 6(2)(j) within six months from the date of notification of these regulations.

Grant of certificate.

7. (1) The Board on being satisfied that the applicant has complied with the requirements specified in regulation 6, shall grant a certificate to the stock broker subject to such terms and conditions as the Board may deem fit and appropriate.

(2) The Board shall send intimation to that effect to the concerned recognised stock exchange of which the applicant is a member.

Procedure where certificate is refused.

8. (1) The Board may refuse the grant of certificate to the applicant after giving a reasonable opportunity of being heard and shall, within thirty days of such refusal, communicate the same along with the reasons for refusal to the applicant and to the concerned recognized stock exchange.

2. An applicant may apply to the Board for reconsideration of its decision of refusal to grant certificate within thirty days from the date of receipt of such communication.

3. The Board shall reconsider such application and communicate its decision as soon as possible in writing to the applicant and to the concerned recognized stock exchange.

Payment of fees.

9. (1) Every applicant eligible for grant of a certificate as a stock broker shall pay such fees and in such manner as specified in Chapter IX.

(2) The Board may, on sufficient cause being shown, grant an additional period up to six months to the stock broker to pay such fees.

Conditions of certificate.

10. The certificate granted under regulation 7 shall be subject to the conditions that the stock broker, –

a. holds the membership of any recognized stock exchange;

b. abides by the rules, regulations and bye-laws of such recognized stock exchange in respect of the activities carried on by it as a stock broker;

c. obtains prior approval of the Board by making an application through a recognised stock exchange for any change in control in the manner as may be specified;

d. pays fees to the Board in the manner provided in these regulations;

e. takes adequate steps for redressal of grievances of the investors within twenty-one calendar days of the date of receipt of the complaint;

f. abides by the Code of Conduct as specified in Chapter VIII;

g. maintains the minimum networth as specified in Chapter X;

h. informs the Board, through a recognized stock exchange, of any material change in the information submitted at the time of registration.

Explanation: For the purpose of this regulation, ‘material change’ shall include–

i. change in control;

ii. change in designated director, key managerial personnel or compliance officer;

iii. change in name;

iv. change in registered office;

v. change in constitution;

vi. change in net worth below the minimum net worth requirement;

vii. change in ‘fit and proper person’ status as specified under Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; and

viii. any other changes as may be specified.

Surrender of certificate.

11. A stock broker, desirous of giving up its activity as a stock broker, shall apply to the Board for surrender of the certificate granted under these regulations, in such manner and subject to such conditions as may be specified by the Board.

Other permitted activities.

12. (1) A stock broker may carry out an activity under the regulatory framework of the other financial sector regulator or any other specified authority in the manner as may be specified by the Board.

(2) Such activity shall fall under the purview of the concerned financial sector regulator or authority.

Explanation: For the purpose of this regulation, the expression “financial sector regulator” shall mean an authority or body constituted under any law for the time being in force to regulate services or transactions in the financial sector and includes the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, the Pension Fund and Regulatory Development Authority, International Financial Services Centres Authority, Ministry of Corporate Affairs, Insolvency and Bankruptcy Board of India and such other authority as may be specified by the Board.

Incidental advice.

13. A stock broker may provide incidental investment advice to its broking clients who might be expected to rely thereon to acquire, dispose of, retain any securities, provided it complies with Chapter III of the Securities and Exchange Board of India (Investment Advisors) Regulations, 2013.

Underwriting activity.

14. (1) A stock broker is eligible to act as an underwriter.

(2) A stock broker may act as an underwriter only out of its own net worth/funds as may be specified.

(3) Every stock broker acting as an underwriter shall comply with the following general responsibilities–

a. it shall not derive any benefit, either directly or indirectly, from underwriting the issue other than the commission or brokerage payable under an agreement for underwriting;

b. the total underwriting obligations under all the agreements shall not exceed twenty times of the net worth;

c. every stock broker acting as an underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement, shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate;

d. it shall enter into a valid agreement with each body corporate for whom it is acting as an underwriter and the said agreement shall, amongst other things, provide for the following, namely –

i. the period for which the agreement shall be in force;

ii. the allocation of duties and responsibilities between the underwriter and the client;

iii. the amount of underwriting obligations;

iv. the period, within which the underwriter has to subscribe to the issue after being intimated by or on behalf of such body corporate;

v. the amount of commission or brokerage payable to the underwriter; and

vi. details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations.

(4)A stock broker, carrying on activities as an underwriter, shall abide by the regulations made under the Act in respect of such activities.

CHAPTER III

GENERAL OBLIGATIONS AND RESPONSIBILITIES

To maintain proper books of account, records, etc.

15. (1) Every stock broker shall keep and maintain, either physically or in electronic form, the following books of account, records and documents, namely–

a. Register of transactions (Sauda Book);

b. Clients ledger;

c. General ledger;

d. Journals;

e.Cash book;

f. Bank pass book or Bank book or Bank statement;

g. Register of Securities, and the statement of account and other records relating to receipt and delivery of securities provided by the depository participants in respect of dematerialized securities;

h. Copy of contract notes issued to clients;

i. Written consent of clients in respect of contracts entered into as principals;

j. Margin deposit book or margin ledger or collateral ledger; and

k. Client account opening forms in the format as may be specified.

2. A stock broker in the Execution Only Platform segment, shall keep and maintain, either physically or in electronic f orm, the books of account, records and documents as specified.

3. Every stock broker shall intimate the place of maintenance of books of account, records and documents to a recognized stock exchange of which it is a member.

4. Every stock broker shall furnish to a recognised stock exchange, of which it is a member, a copy of the audited balance sheet and profit and loss account within six months or a period as may be specified after the close of each accounting period.

5. Every stock broker acting as an underwriter shall also maintain the following additional documents and records –

a. details of all agreements;

b. total amount of securities of each body corporate subscribed to in pursuance of an agreement;

c. a copy of the balance sheet and profit and loss account as at the end of each accounting period and a copy of the auditor’s report on the accounts for that period, for a stock broker being a body corporate;

d. records in respect of all sums of money received and expended by them and the matters in respect of which the receipt and expenditure take place along with statement to its assets and liabilities, for a stock broker not being a body corporate; and

e. such other records as may be specified for underwriting.

Period of maintenance of books of account and records.

16. Every stock broker shall maintain the books of account and other records under regulation 15 for a minimum period of eight years.

Appointment of compliance officer.

17. (1) Every stock broker shall appoint a compliance officer who shall be responsible for–

a. monitoring the compliance of the Act, the Securities Contracts (Regulation) Act, 1956 or any rules or regulations made thereunder as well as the bye-laws, notifications, guidelines, instructions, etc., issued by the Board or recognised stock exchange as the case may be; and

b. redressal of investors’ grievances.

(2) The compliance officer shall immediately and independently report to recognised stock exchange any non-compliance observed.

Other obligations and responsibilities for stock broker.

18. (1) The stock broker shall be required to meet the obligations and discharge responsibilities as stated in sub-regulation (2) to (11), in the manner specified.

Protection of client’s funds and securities.

(2) A stock broker shall–

a. ensure that the clients’ funds are available at all times, as specified;

b. adhere to the allocation and segregation of collaterals at the client level and upstreaming of client funds provisions, as specified; and

c. segregate the money and securities deposited by a client from its own account or account of any other client and shall not use the same for itself or for any other client or for any purpose other than the purposes mentioned in rules, regulations, circulars and guidelines issued by the Board or the Central Government as the case may be or rules, regulations, bye-laws and circulars issued by a recognised stock exchange.

Risk management and internal control.

(3) A stock broker shall have a sound risk management system for comprehensively managing risks and shall have adequate internal procedures and controls with the aim of protecting the interests of clients, their assets and ensuring proper management of risk.

(4) A stock broker shall also–

a. adhere to the audit related requirements as specified;

b. adhere to the Securities and Exchange Board of India {KYC (Know Your Client) Registration Agency} Regulations, 2011 and any circulars or guidelines issued thereunder; and

c. ensure the confidentiality of all the details of the client and shall not disclose such details to any person except as required under any law, rules, regulations or with the express written permission of the client.

Cyber security and cyber resilience.

(5) The stock broker shall have a robust cyber security and cyber resilience framework, as specified.

Grievance Redressal Mechanism.

(6) The stock broker shall ensure that it is continuously enrolled on SEBI Complaints Redress System (SCORES), the common Online Dispute Resolution Portal (ODR) or such other platform, as specified.

Code of advertisement.

(7)The stock broker shall adhere to the code of advertisement, as specified. Outsourcing.

(8) The stock broker shall adhere to the guidelines on outsourcing of activities, as specified. Compliance.

9. A stock broker shall abide by all the provisions of the Act, rules, regulations, notifications, circulars and guidelines issued by the Central Government or the Board as the case may be as well as the rules, regulations, bye-laws, notifications, circulars and guidelines of recognised stock exchange as may be applicable to it as a stock broker.

Investor Charter.

10. The stock broker shall ensure compliance with the Investor Charter specified.

Execution of Orders.

11. A stock broker shall faithfully execute orders on behalf of clients for buying and selling of securities at the best available market price.

Enhanced obligations and responsibilities for qualified stock brokers.

19. (1) The Board may designate a stock broker as a qualified stock broker having regard to its size, scale of operations and likely impact on investors and securities market, on the basis of the following parameters with appropriate weightages specified–

a. total number of active clients;

b. available total assets of clients with the stock broker;

c. trading volumes of the stock broker;

d. end of the day margin obligations of all clients of a stock broker; and

e. proprietary trading volumes of the stock broker.

(2) In addition to obligation specified under regulation 18, the stock broker designated as a qualified stock broker shall be required to meet enhanced obligations and discharge responsibilities, as may be specified, to ensure –

a. appropriate governance structure and processes;

b. appropriate risk management policy and processes;

c. scalable infrastructure and appropriate technical capacity;

d. framework for orderly winding down;

e. robust cyber security framework and processes; and

f. investor services including online complaint redressal mechanism.

Activities restricted or prohibited for stock broker.

20. A stock broker shall refrain from–

a. engaging in activities or schemes of indicative or guaranteed or fixed or periodic returns or payments, which are not permitted under the Regulations, as well as bye-laws, notifications and circulars issued by the Board or a recognized stock exchange, as the case may be;

b. operating any schemes of unauthorised collective investments/portfolio management services;

c. engaging in any activity not permitted under rule 8(1)(f) and rule 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957; and

(d)  accepting cash from its clients either directly or by way of cash deposit to its bank account.

CHAPTER IV

INSTITUTIONAL MECHANISM FOR PREVENTION AND DETECTION OF FRAUD OR
MARKET ABUSE

Systems for surveillance of trading activities and internal controls.

21. The stock broker shall put in place adequate systems for surveillance of trading activities and internal control systems to ensure compliance with all the regulatory requirements as may be specified for the detection, prevention and reporting of potential fraud or market abuse by its clients, directors, senior management, key managerial personnel, employees or authorised persons.

22. The Board or recognised stock exchange may consider the nature of business, the size of its operations and the complexity of the transactions being undertaken by the stock broker while specifying the regulatory requirements.

Obligations with respect to prevention and detection of fraud or market abuse.

23. (1) The stock broker shall maintain clearly documented policies and procedures relating to its surveillance systems and internal controls.

2. The stock broker shall define the roles and responsibilities of its directors, senior management, key managerial personnel, employees or authorised persons, the corrective actions to be taken and the guidelines for reporting of activities as specified under regulation 24.

3. The stock broker, shall review and update the systems, processes, and control procedures on a periodic basis and in any case not less than once in a calendar year, to keep pace with the developments in the securities market and regulatory changes.

4. The thresholds for generation of alerts for various scenarios shall be set at a reasonable level and be documented along with clear rationale for the same.

5. The stock broker shall have adequate systems in place to ensure that its proprietary accounts are used only for the purpose of carrying out proprietary trades and that its operations are in accordance with the requirements as may be specified.

6. The stock broker shall ensure that its trading terminal is used by its employees and authorised persons only.

7. The stock broker shall ensure that its trading terminal are used only at locations approved by recognised stock exchange and that such terminals shall not be used by its clients in any form or manner.

8. The stock broker shall establish and maintain documented processes and systems to detect potential mule accounts or suspicious activity.

9. Any employee of the stock broker, upon having knowledge of any fraud, market abuse or suspicious activity shall forthwith inform the same to the senior management.

10. The stock broker shall put in place an appropriate mechanism for reporting by employees under sub-regulation (9).

Escalation and reporting mechanisms.

24. (1) The stock broker, shall review the compliance with the regulatory requirements specified under this Chapter not less than once in each quarter.

2. The stock broker shall on the detection of any suspicious activity, fraud or market abuse promptly inform the same along with the details to the recognised stock exchanges, in such manner as may be specified.

3. The stock broker shall submit a summary analysis and action taken report on instances of suspicious activity, fraud or market abuse on a half-yearly basis to recognised stock exchanges.

4. Any deviation in adherence to internal controls, risk management policy, surveillance policy, policy for onboarding of clients along with the proposed corrective actions for such deviation shall be placed before the appropriate Committee, Board of Directors or such other equivalent or analogous bodies of the stock broker at regular intervals.

5. Such deviations shall also form a part of the report to be submitted by the stock broker to a recognised stock exchange in terms of sub regulation (3).

6. The stock broker may seek guidance from a recognised stock exchange on any identified suspicious activity for which it could not ascertain the violation of the applicable provision.

Whistle blower policy.

25. (1) The stock broker shall establish, implement and maintain documented whistle blower policy.

2. Such policy shall provide for a confidential channel for employees and other stakeholders to raise concerns about any suspicious activity or a suspected fraudulent, unfair or unethical practices, violations of regulatory or legal requirements or governance vulnerability.

3. The policy should establish procedures to ensure adequate protection of the whistle blowers.

4. The complaints under this regulation against the Board of Directors including those against the managing director, chief executive officer, key managerial personnel, designated directors or promoter shall be addressed to the Audit Committee or other analogous body of the stock broker and the complaints against other employees shall be addressed to the Compliance Officer.

Accountability.

26. The Audit committee or the Board of Directors or persons of other equivalent or analogous rank of the stock broker shall be responsible and accountable for enforcing the provisions of this chapter.

CHAPTER V

PROCEDURE FOR INSPECTION

Board’s right to inspect.

27. (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts and other records or documents of the stock broker for any of the purposes specified below–

a. to ensure that the books of account and other records/documents are being maintained in the manner required;

b. to ensure that the provisions of the Act, the Securities Contracts (Regulation) Act, 1956, rules, regulations, circulars made or issued thereunder are being complied with.

(2) The Board, along with the recognised stock exchange, clearing corporation or depository may conduct a joint inspection of the stock brokers in the manner as may be specified.

Procedure for inspection.

28. (1) Before undertaking any inspection under regulation 27, the Board shall give a reasonable

notice to the stock broker for that purpose.

(2) The Board may, for reasons to be recorded in writing, may dispense with the requirement of such notice in the interest of the investors or in public interest.

Obligations of stock broker on inspection by the Board.

29. (1) It shall be the duty of senior management, key managerial personnel, director, proprietor, partner, officer and employee of the stock broker to provide to the inspecting authority all assistance in connection with the inspection, which the stock broker may reasonably be expected to provide.

2. It shall be the duty of senior management, key managerial personnel, director, proprietor, partner, officer and employee of the stock broker to produce books, accounts, computer data and other documents in its custody or control and furnish the statements and information relating to the transactions in securities market to the inspecting authority within the required time.

3. The stock broker shall allow the inspecting authority reasonable access to the premises occupied by such stock broker or by any other person on its behalf.

4. The stock broker shall extend reasonable facility for examining any books, records, documents and computer data in the possession of the stock broker or any other person and also provide copies of the documents or other materials sought by the inspecting authority.

5. The inspecting authority, during the course of inspection, shall be entitled to examine or record statements of any member, director, partner, proprietor, employee, senior management and key managerial personnel of the stock broker.

Submission of report to the Board.

30. The inspecting authority shall, as soon as possible, submit an inspection report to the Board.

Action on inspection or investigation report.

31. The Board shall after consideration of inspection or investigation report take such action and measures as it may deem fit and appropriate including action under securities laws or under any other law for the time being in force.

Appointment of auditor.

32. (1) In addition to the inspection by inspecting authority, the Board may appoint a qualified auditor to inspect or investigate into the books of account or the affairs of the stock broker.

2. The auditor so appointed shall have the same powers of the inspecting authority as mentioned in regulation 27 and the stock broker shall comply with the obligations specified under regulation 29.

3. Where such inspection or investigation results in adverse findings leading to action under regulation 31, the Board shall be entitled to recover from the stock broker, any expenses including fees paid to the auditors for the purposes of inspection or investigation.

CHAPTER VI

PROCEDURE FOR ACTION IN CASE OF DEFAULT

Liability for contravention of the Act, rules or the regulations.

33. (1) A stock broker shall be liable for any action specified under securities laws or under any other law for the time being in force.

(2) Such action may be taken for violation of any provisions of the Act, rules and regulations made there under as well as of any circular or guidelines etc. issued by the Board including for, –

a. charging of brokerage which is in excess of brokerage specified in the regulations or the bye-laws of the recognised stock exchange;

b. failure to comply with directions issued by the Board under the Act or the regulations framed thereunder or to abide by any decision of the Board;

c. ceasing to be a member of a recognised stock exchange;

d. being declared a defaulter by a recognised stock exchange and has not been re­admitted as a member within a period of six months;

e. failure to co-operate with the inspecting or investigating authority;

f. indulging in market manipulation of securities or index;

g. dealing in securities without obtaining certificate of registration from the Board as a stock broker;

h. dealing in securities or providing trading floor or assisting in trading outside the recognized stock exchange in violation of provisions of the Securities Contracts (Regulation) Act, 1956 or rules made or notifications issued thereunder;

i. failure without reasonable cause—

i. to produce to the investigating authority or any person authorized by it in this behalf, any books or registers;

ii. to appear before the investigating authority personally or to answer any question which is put to it by the investigating authority;

iii. to sign the notes of any examination taken down by the investigating authority;

iv. to file any return or report with the Board; or

(v) to furnish any information, books or other documents within 15 days of issue of notice by the Board;

(j) failure to pay penalty imposed by the adjudicating officer or failure to comply with any of her directions or orders.

CHAPTER VII

POWER TO RELAX STRICT ENFORCEMENT OF THE REGULATIONS

Exemption from enforcement of the regulations in special cases.

34. The Board may exempt any person or class of persons from the operation of all or any of the provisions of these regulations, for a period as may be determined by Board, for furthering innovation relating to testing new products, processes, services, business models, etc., in live environment of regulatory sandbox in the securities markets subject to the applicant satisfying such conditions as may be specified by the Board.

Power to relax strict enforcement of the regulations on the basis of application.

35. (1) The Board may either suo moto or upon receipt of an application, in the interest of investors
or securities market or for the development and regulation of the securities market, relax the strict enforcement of any requirements of these regulations, if the Board is satisfied that:

a. any provisions of Act, rules or regulations under which the entity is established or is governed by, is required to be given precedence to;

b. the requirement may cause undue hardships to investors;

c. the requirement is procedural or technical in nature;

d. the non-compliance is caused due to factors beyond the control of the person; or

e. the requirement is not relevant for a particular class of industry or person.

2. An applicant shall file an application, detailing the grounds on which such relaxation has been sought, to the Board through a recognised stock exchange or clearing corporation along with a non-refundable fee, as specified by the Board.

3. A recognised stock exchange or clearing corporation shall forward such application to the Board along with its recommendation.

4. The Board shall process such application and shall record reasons for acceptance or refusal of relaxations sought by the applicant.

5. Any person submitting a letter or written communication under this regulation may request, along with the reasons, confidential treatment for a specified period not exceeding one hundred and eighty days commencing from the date of the Board’s response.

6. The request received for confidential treatment shall be subject to the following provisions–

(a) If the Board determines to grant the request, the letter or written communication will not be available to the public until the expiration of the specified period;

b. If it appears to the Board that the request for confidential treatment should be denied, the requestor will be so advised with reasons and such person may withdraw the letter or written communication, in which case the fee, if any, paid by the requestor would be refunded;

c. In case where a request has been withdrawn under clause (b), no response will be given and the letter or written communication will remain in the records of the Board but will not be made available to the public;

d. If the letter or written communication is not withdrawn, it shall be available to the public together with the written response of the Board.

CHAPTER VIII

CODE OF CONDUCT

General principles.

36. (1) Integrity: A stock broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all its business.

(2) Diligence, honesty and fairness: A stock broker shall–

a. act honestly, fairly and with due skill, care and diligence and in the interest of investors while conducting its business;

b. not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains;

c. not create false market either singly or in collusion with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market;

d. not involve itself in business in the market beyond reasonable levels not commensurate with its financial soundness;

e. not resort to unfair means to solicit clients from other stock brokers; and

f. not neglect or fail or refuse to submit the required returns and not make any false or misleading statement in any returns required to be submitted to the Board and the recognised stock exchange.

(3) Competence: A stock broker shall–

a. have arrangements to render fair, prompt and competent services to its clients; and

b. take all reasonable steps to ensure that its employees are adequately trained to a level commensurate with their responsibilities and to act professionally at all times.

Duty to the investor.

37. A stock broker shall–

(a) take all reasonable steps to promptly execute client orders in accordance with clients’ instructions;

b. promptly inform its client about the execution or non-execution of an order, and make payment or delivery of securities due to the investor within the timelines specified by Board;

c. issue a contract note to its client, within specified timeline, for all transactions in the form specified;

d. not disclose or discuss with any other person or make improper use of the details of personal investments and other information of a confidential nature of the client which it comes to know in its business relationship;

e. not encourage sales or purchases of securities with the sole object of generating brokerage or commission;

f. not furnish false or misleading quotations or give any other false or misleading advice or information to the clients in an attempt to solicit business in particular securities and enabling itself to earn brokerage or commission thereby; and

d. not deal or transact business knowingly, directly or indirectly or execute an order for a client who has failed to carry out its commitments in relation to securities with another stock-broker.

Conflict of interest.

38. (1) A stock broker, when dealing with a client, shall ensure that no conflict of interest arises between it and the client.

2. In the event of a conflict of interest, it shall disclose the conflict to the client accordingly and shall not seek to gain a direct or indirect personal advantage from the situation.

3. A stock broker shall not consider clients’ interest inferior to its own.

Duty as an underwriter.

39. A stock broker while acting as an underwriter shall undertake the following additional duties–

(a) make all efforts to protect the interests of its clients;

(b)  ensure that it and its personnel acts in an ethical manner in all its dealings with a body corporate making an issue of securities (hereinafter referred to in this chapter as “the issuer”);

(c) not make any statement, either oral or written, which would misrepresent–

i. the services that the underwriter is capable of performing for its client, or has rendered to any other issuer company;

ii. its underwriting commitment;

(d) avoid conflict of interest and make adequate disclosure of its interest;

(e)put in place a mechanism to identify, disclose and resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner;

(f)not divulge to other issuer, press or any party any confidential information about its issuer company, which has come to its knowledge;

(g) not deal in securities of any issuer company without making disclosure to the Board and also to the Board of directors of the issuer company;

h. ensure that any change in registration status or any penal action taken by the Board or any material change in financials (which may adversely affect the interests of clients or investors) is promptly informed to the clients;

i. Upon happening of any event under clause (h), ensure that any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients or investors;

j. not indulge in any unfair competition, which is likely to be harmful to the interest of other entities acting as underwriters carrying on the business of underwriting or likely to place such other underwriters in a disadvantageous position in relation to the underwriter while competing for, or carrying out any assignment;

k. not be party to or instrumental for–

i. creation of false market;

ii. price rigging or manipulation; or

iii. passing of unpublished price sensitive information in respect of securities which are listed or proposed to be listed in any recognised stock exchange to any person or intermediary.

CHAPTER IX

PAYMENT OF FEES BY STOCK BROKERS/ CLEARING MEMBERS/ SELF- CLEARING MEMBERS

Applicability.

40. (1) This chapter shall apply to every stock broker who deals in cash segment and every clearing member/ self-clearing member who clears and settles trades in cash segment, from the date of grant of registration.

2. This chapter shall apply to every stock broker who deals in commodity derivatives and every clearing member/ self-clearing member who clears and settles trades in commodity derivatives, from the date of grant of registration.

3. This chapter shall apply to every stock broker who deals in electronic gold receipt segment and every clearing member / self-clearing member who clears and settles trades in electronic gold receipt segment, from the date of grant of registration.

Charge of fees.

41. (1) Every stock broker / clearing member/self-clearing member shall pay to the Board in accordance with regulation 42, regulation 43, regulation 44, regulation 45 and regulation 46, a fee in respect of the securities transactions including off-market transactions undertaken by them, at the rates mentioned below:

Segment	Rate / Amount (in Rs.)			Remarks
	Stock broker	Clearing member	Self- clearing member
Cash	0.00010 per centof its turnover (Rs. 10 per crore)	*	*	All sale and purchase transactions in securities other than debt securities.
Equity derivatives	0.00010 per cent of its turnover (Rs. 10 per crore)	50,000/-	50,000/-	Explanation. —(A) The expression ‘turnover’ shall include the value of the trades executed by the stock broker on the concerned segment of the recognized stock exchange and of the trades settled on the expiration of the contracts. (B) In case of options contracts, ‘turnover’ shall be computed on the basis of premium traded for the option contracts and in case where the option is exercised or assigned, it shall be additionally computed on the basis of notional value of option contracts exercised or assigned.
Currency derivatives	0.00010 per cent of its turnover (Rs. 10 per crore)	50,000/-	50,000/-
Interest rate derivatives	0.00005 per cent of its turnover (Rs. 5 per crore)	50,000/-	50,000/-
Commodity derivatives Agricultural commodity derivatives	0.00010 per cent of its turnover (Rs. 10 per crore) 0.00001 per cent of its turnover (Rs. 1 per crore)	50,000/-	50,000/-	Explanation. — (A) The expression ‘turnover’ shall include the value of the trades executed by the stock broker on the concerned recognized stock exchange and of the trades settled on the expiration of the contracts. (B) In case of options contracts, ‘turnover’ shall be computed on the basis of premium traded for the option contracts and in case where the option is exercised or assigned, it shall be additionally computed on the basis of notional value of option contracts exercised or assigned.
Debt	0.00002 per cent of its turnover (Rs. 2 per crore)Explanation. — For the purpose of this clause, the expression ‘turnover’ shall include the aggregate value of the trades executed, including both sale and purchase transactions, by the stock broker including the proprietary trading member on the debts segment of the recognized stock exchange.	50,000/-	50,000/-	The fee shall not be applicable for clearing member or self- clearing member in case the said clearing member or self- clearing member is already a clearing member or self- clearing member in any other segment and is paying fee, as specified in this Part, for such segment.
Electronic Gold Receipt Segment	0.00010 percent of turnover (Rs.10 per crore)	*	*	All sale and purchase transactions in Electronic Gold Receipt.
Execution Only Platforms	*	*	*

*As may be specified by the Board.

(2) A clearing member/ self-clearing member shall pay a fee of Rs.50,000 every year till its registration is in force, in the manner specified below–

a. for the first financial year along with the application for registration;

b. for the subsequent financial years before 1st June of that financial year.

(3) The non-refundable fee payable along with an application for registration under regulation 4 shall be a sum of fifty thousand rupees.

(4)  Such fee shall be payable by the applicant by way of direct credit in the bank account through online payment using SEBI payment gateway.

Manner of payment and recovery

42. (1) Every recognized stock exchange, in accordance with the provisions of its bye-laws, shall collect from every stock broker in cash segment, the fee payable under regulation 41 in respect of –

a. securities transactions entered into by it in that recognised stock exchange; and

b. off-market transactions entered into by it which are reported to that recognised stock exchange.

Explanation. – The Board may specify the manner in which fees shall be collected from stock brokers who report the same transactions to different stock exchanges in which they are members, under clause (b).

2. Every recognized stock exchange shall collect from every stock broker in any segment other than cash segment, the fee payable under regulation 41 in respect of turnover in the relevant segment of that recognised stock exchange in accordance with the provisions of its bye-laws.

3. Every commodity derivatives exchange shall collect from every stock broker/clearing member/self-clearing member, dealing/clearing and settling trades in commodity derivatives, the fee payable under regulation 41(1) in accordance with the provisions of its bye-laws.

4. The fee collected by a recognized stock exchange under sub-regulations (1), (2) or (3) during a calendar month shall be paid by the stock exchange to the Board by the fifth working day of the following calendar month.

5. All recognized stock exchanges shall maintain such registers and furnish such returns or information to the Board in respect of the fee collected under this chapter, as may be specified by the Board.

6. Without prejudice to sub-regulation (5), a recognized stock exchange shall also be liable to furnish such information or explanations to the Board as may be required by it in respect of fee collected or liable to be collected under this chapter.

43. A stock broker who also acts as a clearing member or self-clearing member shall pay the annual fee separately, as applicable to each category as specified in regulation 41, by way of direct credit in the bank account through online payment using SEBI payment gateway.

44. (1) Nothing contained in regulation 42 shall affect the primary liability of a stock broker or clearing member or self-clearing member to pay the fees under regulation 41 or shall preclude the Board from recovering any such fee remaining unpaid by any stock broker or clearing member or self-clearing member directly from it.

2. Where due to the stock broker’s or clearing member’s or self-clearing member’s default any fee which was liable to be paid on its behalf under regulation 42 remains unpaid or is paid belatedly, he shall, without prejudice to any other action that may be taken under the Act, rules or regulations, pay an interest of 1 per cent per month for every month of delay or part thereof to the Board.

3. Every stock broker or clearing member or self-clearing member shall be liable to furnish such information or explanations to the Board as may be required by it in respect of fee paid or payable under this chapter.

45. The financial year shall mean the year commencing from 1st April and ending on 31st March of the following year.

46. For the purposes of regulation 42, regulation 43, regulation 44, and regulation 45, the obligations cast on recognised stock exchange and stock broker shall, mutatis mutandis, apply to clearing corporation and clearing member or self-clearing member also.

CHAPTER X

NETWORTH AND DEPOSIT REQUIREMENTS FOR STOCK BROKERS/ CLEARING
MEMBERS/ SELF- CLEARING MEMBERS

47. (1) The trading member/clearing member/self-clearing member/professional clearing member shall comply with the following minimum networth requirements.

NETWORTH FOR MEMBERS DEALING IN SECURITIES

Type of Member	Base Networth (in Rs.)	Variable              Networth#
Trading Member	1 crore	As specified.
Self-Clearing Member	5 crore*
Clearing Member	15 crore*
Professional Clearing Member	50 crore

* In Currency Derivative Segment, Self-Clearing Member and Clearing Member shall have minimum networth of Rs. 5 crore and Rs. 10 crore, respectively.

# Networth requirement for members shall be Base Networth or Variable Networth, whichever is higher.

However, the requirement of Variable Networth shall not be applicable for Execution Only Platforms segment.

(2) The quantum of networth to be maintained by the stock broker/clearing member, shall be reckoned for all segments/recognised stock exchanges.

Explanation 1:

a. For the purposes of this chapter, ‘base networth’ means paid up capital, fully, compulsorily and mandatorily convertible debentures / bonds / warrants (which are convertible within a period of 5 years from the date of issue), free reserves and other securities approved by the Board from time to time, but shall not include fixed assets, pledged securities, value of member’s card, non-allowable securities (unlisted securities), bad deliveries, any debts and advances (except trade debtors of less than 3 months), prepaid expenses, losses, intangible assets and 30% value of marketable securities.

b. In case of securities pledged to clearing corporation, the post haircut value of shares owned by the Trading Member / Clearing Member, as may be specified, shall be considered for computation of the networth.

c. Where the stock broker, clearing member or self-clearing member in the debt segment, is also regulated by a sectoral regulator other than the Board, the networth shall be computed in the manner as specified by such sectoral regulator or as specified by the Board, whichever is higher.

Explanation 2: For the purposes of this chapter, free reserves shall include Profit and Loss, General Reserve, Securities Premium, Preference Share Redemption Reserve and Capital Redemption Reserve, but shall not include reserves created by revaluation of assets.

DEPOSIT REQUIREMENTS FOR STOCK BROKERS/ CLEARING MEMBERS

48. (1) The stock broker/clearing member shall comply with the following minimum deposit requirements.

DEPOSIT FOR MEMBERS DEALING IN SECURITIES

Segment		Trading member (in Rs.)	Clearing member (in Rs.)	Self-clearing member (in Rs.)
Cash		*	*	*
Equity Derivatives		*	50 Lakh	50 Lakh
Currency Derivatives		*	50 Lakh	50 Lakh
Debt		*	*	*
Commodity Derivatives	NCDE	Nil	50 Lakh	50 Lakh
	RCDE	Nil	*	*
Electronic            Gold Receipts		*	1 crore	1 crore
Execution            Only Platforms		*	*	*

NCDE: National Commodity Derivatives Exchanges

RCDE: Regional Commodity Derivatives Exchanges

*As may be specified.

(2) Trading member/clearing member/self-clearing member shall maintain the deposit with the recognised stock exchange/clearing corporation.

Explanation:

The deposit requirement specified for the debt segment shall not be applicable when a clearing member clears and settles all the trades only on gross basis for both securities and funds, without using settlement or trade guarantee fund.

CHAPTER XI

MISCELLANEOUS

Power to remove difficulties

49. In order to remove any difficulties in the interpretation or application of the provisions of these regulations, the Board shall have the power to issue directions through guidance notes or circulars or guidelines.

Power to specify procedures, etc. and issue clarifications

50. For the purposes of implementation of these regulations and matters incidental thereto, the Board may specify norms, procedures, processes, manners or guidelines as specified in these regulations, by way of circular.

Repeal and Savings

51. (1) On and from the commencement of these regulations, the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992 shall stand repealed.

(2) Notwithstanding such repeal–

a. anything done or any action taken or purported to have been done or taken including registration or approval granted, fees collected, registration or approval, suspended or cancelled, inspection, any adjudication, any enquiry or investigation commenced or show cause notice issued under the repealed regulations, prior to such repeal, shall be deemed to have been done or taken under the corresponding provisions of these regulations;

b. any application made to the Board under the repealed regulations, prior to such repeal, and pending before it shall be deemed to have been made under the corresponding provisions of these regulations;

c. the previous operation of the repealed regulations or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the repealed regulations, any penalty incurred in respect of any violation committed against the repealed regulations, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if the repealed regulations has never been repealed.

(3) After the repeal of the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992, any reference thereto in any other regulations, guidelines or circulars issued thereunder by the Board shall be deemed to be a reference to the corresponding provisions of these regulations.

AMIT PRADHAN, Executive Director
[ADVT.-III/4/Exty./594/2025-26]