SEBI board approves revamp of stockbroker regulations; replaces 1992 framework

The Securities and Exchange Board of India (SEBI) has on Wednesday, December 17, approved a comprehensive overhaul of regulations governing stockbrokers, replacing the three-decade-old SEBI (Stock Brokers)

Regulations, 1992 with a new framework.

The move is aimed at modernising broker regulation to reflect the structural and technological changes in India’s capital markets since the early 1990s. The 1992 framework will be replaced with a fresh set of rules under the SEBI (Stock Brokers) Regulations, 2025.

The main objective, SEBI Chairman Tuhin Kanta Pandey said, is to actively remove "repetitive and redundant provisions”.

What the new framework seeks to do

The new framework was introduced mainly to meet the needs of changing practices if trading in the digital age.

For instance, the overhaul establishes formal definition of algorithmic trading, clearer norms for proprietary trading, and a regulatory framework for execution-only platforms (EOPs) that facilitate direct mutual fund transactions.

The framework also seeks to streamline compliance requirements, clarify broker responsibilities and strengthen investor protection mechanisms in line with modern risk management standards.

The 1992 regulations were framed when floor-based trading was still prevalent and electronic, algorithmic and app-based trading had not yet emerged.

Although it was amended multiple times to accommodate new practices, SEBI has now opted for a complete replacement rather than additional updates to address gaps and inconsistencies.

To mitigate challenges of the digital times, the regulator made clear that brokers are legally responsible for safeguarding client funds and securities, ensuring money and shares belonging to clients are properly segregated and not misused, maintaining robust risk-management systems, and putting in place strong internal controls and compliance mechanisms to monitor operations and detect violations early.

The regulatory body, during its board meeting, also decided that the total expense ratio (TER) will be calculated as the sum of the base expense ratio, brokerage, and regulatory and statutory levies, bringing greater transparency to how fund costs are disclosed to investors.