Recent SEBI Reforms to Strengthen India’s Securities Market

Abstract

The Securities and Exchange Board of India (SEBI) is the statutory regulatory body for India’s securities market, established on April 12, 1992, to protect investors and regulate market intermediaries. It oversees stock exchanges, prevents fraudulent practices, and promotes market transparency, enforcing regulations through quasi-legislative, executive, and judicial powers.

Key Aspects of SEBI

Establishment: Originally set up as a non-statutory body in 1988, it gained statutory status through the SEBI Act, 1992.
Core Objectives: To protect investor interests, regulate the securities market, and promote its development.

Main Functions:

 Prohibiting Insider Trading: Preventing fraudulent and unfair trade practices.
 Regulatory Oversight: Registering and regulating brokers, sub-brokers, and other intermediaries.
 Investor Education: Educating investors and training intermediaries.
 Disclosure Standards: Enforcing strict disclosure norms for listed companies to ensure transparency.
 Structure: Comprises three roles in one: quasi-legislative (drafts regulations), quasi-judicial (passes rulings), and quasi-executive (investigates/enforces).
 Recent Focus: Strengthening corporate governance through enhanced disclosure requirements (LODR) and adapting to new technology in disclosures.
SEBI has been instrumental in modernizing the Indian capital
markets and improving their safety, transparency, and
efficiency.

Introduction

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI), established in 1992, regulates India’s securities market, protects investor interests, and promotes market development. Its key powers include quasi-legislative (rule-making), quasijudicial (judgments), and quasi- executive (investigation/enforcement) authority to curb insider trading, regulate intermediaries, and ensure transparency. Investment and securities law forms the backbone of financial market regulation in India. It governs the issuance, trading, and protection mechanisms related to securities such as equities, bonds, and derivatives.

The primary regulatory authority overseeing this domain is the Securities and Exchange Board of India (SEBI), established under the SEBI Act, 1992.

SEBI’s mandate is threefold:
(i) Protection of investors,
(ii) Promotion of market development,
(iii) Regulation of securities markets.
Over time, especially in the period between 2024–2026, SEBI has adopted a proactive regulatory approach in response to rapid technological changes, increased retail participation, and global integration of financial markets.

SEBI’s functions are categorized into three main areas

Protective Functions: These include prohibiting insider trading, preventing fraudulent and unfair trade practices, and promoting investor education and awareness.

Regulatory Functions: These involve registering and regulating brokers, sub-brokers, transfer agents, and other intermediaries; regulating stock exchanges; and monitoring
mergers and takeovers of companies.

Developmental Functions: SEBI promotes investor education, training of intermediaries, and adopts flexible approaches to improve market efficiency, such as facilitating electronic
trading.

Main Objectives of SEBI

1. Investor Protection: To safeguard investors against fraud and provide a fair disclosure system.
2. Market Regulation: To ensure transparent and efficient operation of the capital markets.
3. Intermediary Oversight: To register and regulate stockbrokers, portfolio managers, and other intermediaries.

Objectives of Securities Regulation

The theoretical framework of securities regulation rests on three core pillars:
1. Investor Protection – Preventing fraud, insider trading, and unfair practices.
2. Market Integrity – Ensuring fairness and transparency.
3. Systemic Stability – Minimizing financial contagion risks. SEBI’s regulatory philosophy aligns with global standards set by the International Organization of Securities Commissions (IOSCO).

The primary objectives of securities regulation are to protect investors, ensure fair, efficient, and transparent markets, and reduce systemic risk. These regulations aim to
minimize information asymmetry through mandatory disclosures, promote market integrity, and foster capital formation, as established in the IOSCO

Key Powers of SEBI

To perform its functions, SEBI is empowered to:
1. Quasi-Judicial: Adjudicate on violations of security laws, conduct hearings, and pass binding orders, including imposing fines.
2. Quasi-Legislative: Formulate rules, regulations, and guidelines to govern the securities market (e.g., listing agreements).
3. Investigative & Executive: Inspect account books, call for information, and conduct inquiries to check price manipulation and scams.
4. Penal Action: Suspend, cancel registration, or levy monetary penalties on market intermediaries violating regulations.

Objectives and Principles of Securities Regulation

Core Objectives of Securities Regulation:

Investor Protection: To safeguard investors against misleading, manipulative, or fraudulent practices, ensuring they have access to full, accurate, and timely information for making informed decisions.
Fair, Efficient, and Transparent Markets: Fairness: Ensuring equitable treatment of all market participants and preventing unfair advantages, such as insider trading.
Transparency: Promoting the public availability of information regarding trading rules, asset valuation, and pricing.
Efficiency: Maintaining market structures that facilitate swift, accurate transactions and price discovery.
Systemic Risk Reduction: To monitor and mitigate risks that could cause market disruptions, ensuring the stability of the financial system.
Capital Formation and Market Development: To encourage a robust, well-regulated environment that attracts investment and supports economic growth.

Legal Framework Governing Securities in India

The legal framework governing securities in India is primarily regulated by the Securities and Exchange Board of India (SEBI), established under the SEBI Act, 1992, to protect investors and ensure market transparency.

Key legislation includes the Securities Contracts (Regulation) Act, 1956, Companies Act, 2013, and Depositories Act, 1996. SEBI oversees intermediaries, stock exchanges, and prohibits unfair trade practices.

Key Legislative Framework

1.SEBI Act, 1992: Vests SEBI with statutory power to regulate the securities market, protects investors, and penalise violations.
2.Securities Contracts (Regulation) Act, 1956 (SCRA): Regulates stock exchanges and ensures legitimate transactions, including listing of securities.
3.Depositories Act, 1996: Provides for holding and transferring securities in dematerialized (demat) form.
4.Companies Act, 2013: Governs issuance, allotment, and transfer of securities, along with disclosures by public companies.
5.Securities Markets Code Bill 2025 (Proposed): Aims to consolidate the SEBI Act, SCRA, and Depositories Act into a single, unified code for modern market regulation.

Primary Regulatory Authority

SEBI: Acts as the primary regulator, issuing regulations for stockbrokers, mutual funds, insider trading, and fraudulent trade practices (PFUTP).

Redressal and Enforcement

1.Securities Appellate Tribunal (SAT): A specialized tribunal that hears appeals against SEBI’s orders.
2.Investor Protection Funds: Regulated by SEBI to manage risks and protect investor interests.
3.The Indian securities market is governed by a triad of statutes:
 SEBI Act, 1992
 Securities Contracts (Regulation) Act, 1956 (SCRA)
 Depositories Act, 1996

In addition, SEBI issues subordinate legislation in the form of regulations, circulars, and guidelines.
A landmark development is the proposed Securities Market Code, 2025, which seeks to consolidate these fragmented laws into a unified framework.

Key Powers of SEBI

To perform its functions, SEBI is empowered to:
 Quasi-Judicial: Adjudicate on violations of security laws, conduct hearings, and pass binding orders, including imposing fines.
 Quasi-Legislative: Formulate rules, regulations, and guidelines to govern the securities market (e.g., listing agreements).
 Investigative & Executive: Inspect account books, call for information, and conduct inquiries to check price manipulation and scams.
 Penal Action: Suspend, cancel registration, or levy monetary penalties on market intermediaries violating regulations.
The Supreme Court in Sahara India Real Estate Corporation Ltd v SEBI affirmed SEBI’s wide enforcement powers.
Recent reforms in SEBI are driven by:
 Surge in retail investors post-COVID
 Growth of Fintech and algorithmic trading
 Rise in derivatives volumes
 Increased cross-border investments
These developments exposed regulatory gaps, necessitating SEBI’s intervention.
Recent SEBI reforms (early 2026) focus on enhancing market efficiency, strengthening investor protection, and easing compliance for market intermediaries. Key changes include allowing net settlement for FPIs, tightening thematic mutual fund rules, easing AIF  liquidation rules, and simplifying IPO disclosures to boost market transparency.

Key recent SEBI reforms include:

 Foreign Portfolio Investors (FPIs): FPIs can now net their obligations for cash market transactions, improving capital efficiency and reducing operational costs.
 Alternative Investment Funds (AIFs): Increased flexibility in winding up schemes, allowing AIFs to hold assets beyond their tenure for liquidating specific assets.

 Thematic Funds: Stricter “true to label” rules to prevent thematic funds from drifting into other areas.
 Equity Allocation: Some categories now require a minimum of 80% investment in equity, up from 65%.
 Cost & Transparency: Restructuring expense norms.
 Stock Broker Regulations: The 1992 regulations were replaced with the SEBI (Stock Brokers) Regulations, 2025, updating market operations.
 IPOs & Disclosures: Streamlined IPO process with a standardized abridged prospectus and enhanced monitoring of new listings.
 Ease of Doing Business: Relaxation in reporting for stock brokers and simplified, paperless investor services.
 Merchant Bankers: Increased responsibility on merchant bankers for independent assessment and risk control in public issues.
 Commodity Derivatives: Extension of the ban on certain agricultural commodity derivatives until March 31, 2027.

Recent SEBI Reforms {Detailed Analysis}

Securities Market Code, 2025
The Securities Markets Code, 2025, introduced in the Lok Sabha on December 18, 2025, is a landmark bill aimed at consolidating and replacing three major legislations:

The SEBI Act 1992, Securities Contracts (Regulation) Act 1956, and Depositories Act 1996. It seeks to harmonize, modernise, and streamline India’s securities regulatory framework.
The proposed Securities Market Code, 2025 represents a paradigm shift:
 Consolidates multiple laws into a single code
 Introduces clarity and reduces redundancy
 Enhances enforcement powers
It follows global codification trends similar to financial reforms
in the UK and Singapore.

Overhaul of Stock Broker Regulations (2025)
The Stock Brokers Regulations, 2025 replace the 1992 rules, which were framed for an era of physical settlement and limited product complexity. The new framework is organized into clearly defined chapters covering registration, obligations, and supervision.
SEBI replaced legacy regulations with modern provisions:
 Digital compliance frameworks
 Revised capital adequacy norms
 Streamlined registration processes
This aligns regulatory norms with contemporary trading environments. Risk-Based Supervision Framework SEBI adopted a risk-based regulatory model, classifying brokers as:
1.Qualified Stock Brokers (QSBs)
2.Non-systemic brokers
This approach allows targeted supervision and efficient resource allocation.

IPO Regulatory Reforms
SEBI’s 2025–2026 IPO regulatory reforms focus on streamlining capital raising for startups and large firms, strengthening investor protection, and enhancing market stability. Key changes include reduced minimum public offer requirements for large companies, relaxed ESOP rules for founders, stricter anchor investor lock-ins, and simplified, standardized disclosures.
Key changes include:
 Simplified disclosure norms
 Faster approval processes
 Enhanced transparency in offer documents
These reforms balance capital formation with investor protection.

Key 2025–2026 IPO Regulatory Reforms
Reduced Public Float (MPO): For companies with post-issue market cap > ₹5 lakh crore, the mandatory public float is reduced from 5% to 2.5%. Large issuers (₹1–5 trillion) have
revised lower thresholds, offering flexibility.
Extended MPS Timelines: Companies can take 5 years to achieve 15% public shareholding and up to 10 years to reach 25%, particularly beneficial for mega-IPOs.
Anchor Investor Reforms: SEBI’s new IPO reforms reshaping India’s listing landscape – EY notes expanded anchor participation, including pension and insurance funds.
Additionally, 50% of the anchor book is now locked in for 90 days, increasing price stability.
Founder/Startup Perks: Founders can now retain and exercise ESOPs, provided they were granted at least one year before filing the Draft Red Herring Prospectus (DRHP).
OFS Eligibility Changes: Equity shares arising from the conversion of CCPS or CCDs (Court-approved schemes) can be sold without meeting the strict one-year pre-IPO holding requirement.
Simplified Disclosures: Decoding SEBI’s Game-Changing IPO Regulations highlights the introduction of a more concise “offer document summary” to replace the, at times, overly detailed abridged prospectus, enhancing readability for investors.

Strengthening Derivatives Market Regulation
SEBI has implemented major reforms, effective from October 2024 through 2025, to tighten equity derivatives regulation, focusing on investor protection and curbing speculation. Key measures include reducing index derivative weekly contracts, raising contract sizes, imposing stricter, and implementing upfront margin collection.
India’s derivatives market is among the largest globally. SEBI introduced:
 Revised open interest norms
 Enhanced margin requirements
 Position limits
These steps reduce excessive speculation and systemic risks.
Key regulatory changes initiated by SEBI to enhance market stability:
Rationalized Weekly Contracts: Weekly index options contracts were limited, reducing excessive speculation on expiry days.
Increased Contract Sizes: Minimum contract sizes for index derivatives were raised to reduce over-leveraging by traders, particularly in the retail segment.
Stricter Margin Requirements: Upfront collection of option premiums from buyers is now mandatory, alongside increased tail risk coverage and the removal of calendar spread margin benefits on expiry days to prevent excessive risk-taking.
Tightened Position Limits: Stringent limits on positions for index and stock derivatives have been imposed (e.g., individual trader exposure limits) to reduce systemic risks.
Increased Monitoring: Real-time, intraday monitoring of position limits is implemented, alongside increased surveillance to detect market manipulation.
Specific Risk Coverage: An additional 2% Extreme Loss Margin (ELM) is levied on short options on expiry days, per SEBI’s revised 2024 measures.
These reforms, detailed in this October 2024 SEBI circular, aim to increase market resilience and protect the increasing number of retail participants from extreme volatility.

Introduction of T+0 Settlement
SEBI introduced T+0 settlement cycle, enabling same-day
settlement:
 Reduces counterparty risk
 Improves liquidity
 Enhances investor confidence
India is among the first major markets to adopt this system. SEBI introduced an optional T+0 (same-day) settlement cycle on March 28, 2024, for the equity cash market to complement the existing T+1 system. It enables same-day, faster, and more liquid transactions, with funds and securities credited by 4:30 PM for trades made before 1:30 PM. This optional system primarily benefits retail investors.
Key Details of the T+0 Settlement System:
 Settlement Timing: Trades done on day “T” are settled on day “T” itself, with funds and securities credited by 4:30 PM.
 Operational Mechanism: The T+0 cycle operates with two phases—phase 1 up to 1:30 PM and phase 2 from 1:30 PM to 3:30 PM.
 Initial Scope: Initially available for a limited number of top listed stocks (500) and for non-custodian/noninstitutional investors.
 Trading Hours: The T+0 session runs from 9:15 AM to 1:30 PM, with a specialized block deal session from 8:45 AM to 9:00 AM.
 Optionality: The T+0 system runs alongside the existing T+1 settlement cycle.
Benefits and Impact:
 Increased Liquidity: Sellers receive funds immediately, freeing up capital faster for reinvestment, and buyers receive securities immediately.
 Risk Reduction: Immediate settlement lowers the risk of settlement shortages.
 Efficiency: The system enhances the overall efficiency of the stock market ecosystem.
 Global Positioning: The initiative positions the Indian securities market as a leader in innovative, fast-paced trading environments.
Mutual Fund Reforms
Reforms include:
 Total Expense Ratio (TER) rationalization
 Improved disclosure norms
 Enhanced governance of Asset Management Companies
These changes ensure transparency and investor protection. SEBI’s 2026 mutual fund reforms significantly overhaul the industry, enhancing investor protection and flexibility. Key changes include allowing 35% non-core allocation into gold, silver, and InvITs, introducing life cycle and sectoral debt funds, reducing Total Expense Ratio (TER) transparency, and enhancing SEBI guidelines.

Key 2026 Mutual Fund Reforms

Asset Allocation Flexibility: Equity funds can now invest up to 35% of their non-core portfolio in gold, silver, InvITs, and debt instruments, providing greater flexibility to managers.
Life Cycle Funds: Target-date funds with automatic glide paths to adjust asset allocation, with maturities ranging from 5 to 30 years.
Sectoral Debt Funds: Introduction of debt funds focused on specific sectors like infrastructure, financial services, and energy.
Rationalization and Structure:
 Solution-Oriented Funds Discontinued: Retirement and children’s funds are being phased out and merged into other schemes.
 Portfolio Overlap Limit: Equity funds face stricter controls to prevent duplication, aiming for better diversification.
 True-to-Label Mandate: Stronger regulations to ensure scheme names match their investment strategies.
Fee and Expense Structure:
 Total Expense Ratio (TER) Revamp: Mandatory breakdown of TER into Base Expense Ratio (BER – AMC controlled) and external charges (brokerage, taxes, levies).
 Reduced Charges: Additional expense provisions for AMCs have been removed, lowering the cost burden on investors.
Regulatory Compliance:
 Insider Trading Rules: Mutual fund units are now formally covered under SEBI’s 2015 Insider Trading Regulations, increasing accountability for AMC employees and trustees.
 ESG Disclosure: Enhanced reporting requirements for ESG (Environmental, Social, and Governance) funds.

Informal Guidance Scheme, 2025
The revised scheme:
 Provides interpretative clarity
 Encourages proactive compliance
 Reduces litigation
It replaces the earlier 2003 framework.
The SEBI (Informal Guidance) Scheme, 2025, effective December 1, 2025, replaces the 2003 framework to offer modernised, faster regulatory clarity for market participants, including stock exchanges, depositories, and listed entities. It provides Interpretive Letters and No-Action Letters to reduce compliance uncertainty, with requests filed electronically for a ₹50,000 fee.

Key aspects of the SEBI (Informal Guidance) Scheme,
2025

 Purpose: To offer guidance on legal interpretations or confirm non-enforcement (No-Action Letter) for proposed transactions.
 Applicability: Applies to intermediaries, listed companies, companies aiming to list, and market infrastructure institutions (stock exchanges, clearing corporations, depositories).
 Process: Applications are submitted electronically (via email), with a streamlined, faster response mechanism generally expected within 60 days.
 Limitations: The scheme does not apply to hypothetical questions, situations with ongoing litigation, or cases lacking direct interest.
 Confidentiality: Applicants can request confidential treatment of their queries and the subsequent responses for up to 90 days. All applications filed on or after December 1, 2025, are governed by this new scheme, ensuring updated regulatory compliance.

Regulation of Investment Advisers and Research Analysts
SEBI tightened norms for:
 Investment Advisers (IA)
 Research Analysts (RA)
Key features:
 Increased accountability
 Segregation of advisory and distribution services
 Stronger compliance requirements
SEBI regulates Investment Advisers (IAs) and Research Analysts (RAs) through amended 2013/2014 regulations, requiring mandatory registration, NISM certifications, and stringent compliance to safeguard investors. New 2025 guidelines introduce tiered deposits (₹1–10 lakh), mandatory client-level segregation, and enhanced record-keeping, with compliance deadlines for existing IAs by June 30 and RAs by April 30.
Key Regulatory Aspects
 Registration & Eligibility: Individuals require a graduate degree and passing NISM- series-XV (for RAs) or NISMSeries-X-A/X-B (for IAs).
 Revised Norms (2025): The minimum net worth requirement is replaced with a deposit based on client numbers (up to 150 clients: ₹1 lakh, 151-300: ₹2 lakh, etc.).
 Fee Structure: IAs have flexibility to switch between asset-under-advice (capped at 2.5% p.a.) and fixed fees (capped at ₹1,50,000 p.a.).
 Operational Compliance: IAs must ensure client-level segregation of advisory and distribution activities.
 Research Analyst Restrictions: RAs cannot trade in securities 30 days before and 5 days after publishing a report.
 Conflict Management: Both IAs and RAs must manage conflicts, provide disclosures, and maintain records for 5 years.

Recent Developments
 Partnership Firms: Partnerships with unqualified partners must register as LLPs or bodies corporate by September 30, 2025.
 Part-time Advisers: Permitted, provided they adhere to qualification and certification criteria.

Strengthening Market Infrastructure Institutions
Market Infrastructure Institutions (MIIs) include:
 Stock exchanges
 Clearing corporations
 Depositories
SEBI has enhanced governance norms and accountability mechanisms for MIIs.
SEBI is strengthening Market Infrastructure Institutions (MIIs)—stock exchanges, clearing corporations, and depositories—by enhancing governance, accountability, and technology standards. Key initiatives include appointing dedicated Executive Directors (EDs) for compliance and technology, strengthening board independence with 2/3 Public Interest Directors (PIDs), and tightening oversight.

Key Aspects of Strengthening MII Governance (2025-
2026)

 Regulatory Focus: On December 12, 2025, SEBI introduced measures to enhance the oversight and accountability of MIIs.
 Core Reforms: Proposals focus on separating Key Managerial Personnel (KMPs) roles, increasing the accountability of governing boards, and enforcing strict compliance standards.
 Leadership Structure: MIIs are advised to appoint two
specialized Executive Directors (EDs): one for Critical Operations (Technology) and another for Compliance and Risk Management.
 Independent Oversight: The Standing Committee on Technology (SCOT) and Regulatory Oversight Committee (ROC) will hold independent meetings with these EDs to
evaluate performance.
 Conflict of Interest: Mandatory cooling-off periods for directors are enforced to prevent conflicts when moving between competing MIIs.
Key Objectives
 Prioritize Public Interest: Ensure MIIs prioritize their function as “first-line regulators” over commercial profits.
 Enhance Resilience: Boost technological and operational resilience to reduce systemic risks within the financial ecosystem.
 Better Risk Management: Strengthen the monitoring of clearing corporations and depositories to ensure safe settlement and investor protection.

Technology-Driven Regulation (SMART Initiative)
SEBI launched the SMART initiative:
 Use of AI for surveillance
 Real-time monitoring systems
 Cybersecurity enhancements
This reflects a shift toward RegTech and SupTech.
Technology-Driven Regulation, often conceptualized within the “SMART” initiative framework, involves leveraging advanced technologies—such as Artificial Intelligence (AI), the Internet of Things (IoT), blockchain, and big data analytics—to create more effective, efficient, and proactive regulatory frameworks.
It marks a shift from static, manual “regulate-and-forget” approaches to dynamic, data-driven, and often real-time supervision (RegTech and SupTech).

Key Dimensions and Concepts
RegTech (Regulatory Technology): Uses technology to solve regulatory and compliance requirements more effectively, such as automated reporting, real-time risk monitoring, and
blockchain-based audit trails.
SupTech (Supervisory Technology): Application of technology by regulators to enhance supervision, using big data and AI for predictive, forward-looking oversight rather than just analyzing past data.
Agile Regulation: A responsive, iterative approach that uses sandboxes to experiment with new technologies (e.g., drones, AI) while simultaneously developing safety protocols.
SMART Standards Initiative (IEC/ISO): Develops machinereadable, actionable standards that can be directly integrated into software and systems to improve compliance and efficiency in various industries.

Insider Trading Regulations
Amendments include:
 Broader definition of insiders
 Stricter disclosure obligations
 Enhanced penalties
These changes aim to prevent information asymmetry.
Insider trading regulations, primarily governed by the SEBI (Prohibition of Insider Trading) Regulations, 2015 in India, strictly prohibit trading in listed or proposed-to-be-listed securities while in possession of Unpublished Price Sensitive Information (UPSI). These regulations, amended through 2024, define insiders, enforce code of conduct, and mandate
disclosures to prevent unfair advantages.

Key Aspects of SEBI PIT Regulations:
Definition of Insider & Connected Person: Includes directors, employees, and anyone connected (or associated in the past 6 months) to the company, or those with access to UPSI.
Prohibition on Communication: Insiders cannot communicate, provide, or allow access to UPSI to any person except for legitimate purposes, performance of duties, or legal obligations.
Trading Window Closure: Designated persons are restricted from trading during the closure of the trading window, which runs from the end of a quarter until 48 hours after the
declaration of financial results.
Pre-clearance: Designated persons must obtain pre-clearance from the compliance officer for trades exceeding specified thresholds.
Contra Trade Restriction: Designated persons cannot enter into an opposite transaction (e.g., buying after selling) within 6 months of a trade.

Penalties and Enforcement:
Strict Reporting: Companies are required to report lapses and maintain records of designated persons.
Penalties: Under Section 15G of the SEBI Act, 1992, violators can face penalties of at least ₹10 lakhs, extending up to ₹25 crores or 3 times the profit made, whichever is higher.
Disciplinary Action: Companies must impose sanctions, including wage freezes, suspension, or recovery, for breaches of the code of conduct.
Simplification and Cost Reduction
SEBI has:
 Reduced compliance burdens
 Simplified regulatory language
 Lowered transaction costs
This improves ease of doing business in securities markets.
SEBI (Securities and Exchange Board of India) has undertaken a massive exercise to simplify regulations and reduce compliance costs across the financial ecosystem, particularly in the mutual fund and stockbroking industries. The primary objective is to enhance ease of doing business, lower costs for investors, and improve market transparency, with several proposals approved or under consideration as of
late 2025 and early 2026.

Key pillars of SEBI’s simplification and cost reduction
drive include:

1. Mutual Fund Regulatory Overhaul (2025-2026 Proposals) Total Expense Ratio (TER) Reduction:

SEBI proposed reducing the base TER by 15–20 basis points for open-ended equity and non-equity schemes, allowing investors to retain more of their returns.
Removal of Hidden Costs: Statutory levies such as STT, GST, and stamp duty are to be excluded from the TER and charged separately, eliminating the bundling of taxes within
management fees.
Brokerage Caps: Brokerage charges are proposed to be drastically reduced—down to 2 bps for cash transactions (from 12) and 1 bps for derivatives (from 5).
Performance-Linked Fees: An optional, performance-linked TER framework is proposed, rewarding fund houses only when they deliver returns exceeding their benchmark.
Reduced Compliance: Fewer mandatory trustee meetings and a shift toward digital-first, online disclosures rather than print advertisements.

2. Simplification of Procedures and Documentation Transmission of Securities:

SEBI has increased the threshold for simplified documentation for transmission of securities
(after an investor’s death) to ₹10 lakh for physical holdings and ₹30 lakh for demat holdings, allowing faster claims for heirs.
Duplicate Certificates: Streamlined procedures for issuing duplicate securities, including standardizing forms and reducing notarization requirements.
Client Onboarding: Proposals to simplify and harmonize the KYC (Know Your Customer) process through KYC Registration Agencies (KRAs) to reduce repetitive documentation and speed up onboarding.
Accreditation Norms: Simplification of requirements for grant of accreditation to investors.

Foreign Investment Reforms

SEBI has liberalized norms for:
 Foreign Portfolio Investors (FPIs)
 Debt market participation
 Global index inclusion
These reforms attract foreign capital and deepen markets. SEBI has implemented major foreign investment reforms, including allowing Foreign Portfolio Investors (FPIs) to settle trades on a net basis to reduce funding costs and launching the “Swagat-FI” single-window system for faster registration.
These reforms enhance ease of doing business for FPIs, REITs, and InvITs, addressing operational hurdles and aiming to increase capital inflows.

Key Reforms:
Netting of Transactions: FPIs can now offset buy and sell trades on the same day, reducing funding requirements and transaction costs.
Swagat-FI System: A streamlined, digital single-window portal designed for faster FPI registration and improved Know Your Customer (KYC) processes.
REITs & InvITs Ease: Rules for Real Estate Investment Trusts and Infrastructure Investment Trusts are simplified, allowing for better investment flexibility, including in greenfield projects.
Stricter Disclosure: The disclosure threshold for FPIs regarding beneficial ownership has been doubled to ₹50,000 crore.
Operational Flexibility: Enhanced measures for Foreign Portfolio Investors (FPIs) and Designated Depository Participants (DDPs) are detailed in the SEBI Operational
Guidelines.

Further Regulatory Changes

“Fit and Proper” Criteria: Revised criteria ensure that an FIR or charge sheet against an intermediary does not cause automatic disqualification. AIF Social Impact Funds: The minimum investment threshold for social impact funds under Alternative Investment Funds
(AIFs) has been significantly lowered to ₹1,000 to improve access.

Digital Forensics and Enforcement

SEBI strengthened enforcement by:
 Collaborating with forensic institutions
 Using big data analytics
 Enhancing investigation tools
This improves detection of complex financial frauds.
SEBI is actively strengthening its enforcement capabilities by empanelling specialized digital forensics agencies and partnering with National Forensic Sciences University (NFSU).
These initiatives focus on advanced forensic auditing, cloud data acquisition, and cyber security to detect financial market violations, with a 2025 MoU enhancing expertise in AI-driven forensics, data analytics, and investigator training.

Key Aspects of SEBI’s Digital Forensics & Enforcement

 Empanelment of Agencies: SEBI frequently empanels expert agencies to assist in forensic acquisitions, including cloning, imaging, and analyzing mobile phones, servers, and computers.
 Cloud Data & Mobile Forensics: Empanelled entities are tasked with data acquisition from platforms such as Telegram, WhatsApp, and Google Mail, along with retrieving deleted data and analyzing metadata.
 Strategic Partnership with NFSU: A November 2025 MoU with NFSU enables technical training for SEBI officers and establishes laboratories focused on forensic accounting
and data analytics.
 Scope of Investigations: Focuses on forensic investigation of mutual funds, AMCs, Trustees, and specialized cyber audits to detect market manipulation and fraudulent
transactions.
 Key Forensic Services: Services include, but are not limited to, onsite imaging, password cracking, keyword searching, and time-line analysis of digital assets.
 Recent Trends: The focus has shifted toward proactive, rather than reactive, forensic audits, with specialized training programmes aimed at enhancing operational efficiency in digital forensics.

Investor Protection Measures

Key initiatives include:
 SCORES grievance redressal system
 Investor awareness programs
 Mandatory disclosures
Investor protection remains SEBI’s central objective. The Securities and Exchange Board of India (SEBI) protects investors through strict regulation of market intermediaries, mandatory company disclosures, and proactive grievance redressal. Key measures include the SCORES platform for complaints, investor education campaigns, surveillance to prevent insider trading, and mandatory registration for brokers and sub-brokers to ensure integrity.

Core SEBI Investor Protection Measures

 SEBI Complaints Redress System (SCORES): A centralized online system for investors to lodge complaints against listed companies and intermediaries,
ensuring timely redressal.
 Intermediary Regulation: Mandatory registration and regulation of brokers, sub-brokers, portfolio managers, and transfer agents to ensure “fit and proper” status.
 Disclosure Norms: Companies must provide full, accurate, and timely disclosure of financial results, corporate governance, and key acquisitions to facilitate informed
decisions.
 Investor Education: SEBI conducts awareness campaigns, publishes newsletters, and promotes investor associations to educate investors on rights and risks.
 Market Surveillance: Strict measures to prohibit insider trading, fraudulent, and unfair trade practices to maintain market integrity.
 Investor Protection Fund (IPF): Maintained by stock exchanges to compensate investors against claims from defaulting brokers.
Key Regulatory Actions:
 Stricter Auditor Standards: Enhanced guidelines for auditors and credit rating agencies to ensure financial reporting integrity.
 Sub-broker Regulation: Strict rules requiring all sub brokers to be registered with SEBI to prevent unauthorized dealing.
 Online Dispute Resolution (ODR): Implementation of ODR mechanisms for disputes arising in the securities market.
 IPF/IEPF: Management of the Investor Education and Protection Fund (IEPF) for unclaimed dividends and shares.

Case – Sahara India Real Estate Corp. v.
SEBI (2012)

Historical background of case:- Sahara India Real Estate Corp. v. SEBI (2012) stemmed from two Sahara group companies raising over ₹27,000 crore via Optionally Fully Convertible Debentures (OFCDs) from 3 crore investors, claiming it was a private placement exempt from SEBI regulation.

Facts of case

In Sahara India Real Estate Corp. v. SEBI (2012), the Supreme Court upheld [SEBI’s authority to regulate Sahara’s illegal raising of over ₹24,000 crore from 3 crore investors through Optionally Fully Convertible Debentures (OFCDs).
Legal Issues in the case :-
1. Whether OFCDs are “Securities”
Issue:
Are Optionally Fully Convertible Debentures (OFCDs) actually “securities” under law?
Why it mattered:
If YES → SEBI has jurisdiction
If NO → Sahara escapes SEBI regulation
Court’s Take:
OFCDs = securities under the Securities Contracts (Regulation) Act, 1956 Lekha News
Translation:
You can’t invent fancy financial jargon and dodge regulation. If it walks like a security, it is a security.
2. Public Issue vs. Private Placement
Issue:
Was Sahara’s fundraising a private placement or a public
issue?
Facts vibe:
Sahara raised ~₹24,000 crore
From millions of investors
Legal Question:
Does calling something “private” make it private?
Court’s Take:
NOPE.
If offer is made to 50+ persons → it becomes a public issue
Lekha News
Sahara had crores of investors → clearly public issue
Big doctrine: Substance over form
Juris Codex
3. SEBI vs ROC – Who has Jurisdiction?
Issue:
Does SEBI regulate Sahara, or only the Registrar of
Companies (ROC)?
Sahara’s argument:
“We are an unlisted company → SEBI stay out.”
Court:
Under Section 55A (Companies Act, 1956),
SEBI controls public issues of securities, even by unlisted
companies
Lawful Legal
Meaning:
You raise money from the public → SEBI enters the chat.
4. Non-compliance with Disclosure & Listing Requirements
Issue:
Did Sahara follow mandatory rules like:
Filing prospectus with SEBI
Listing on stock exchange
Disclosure norms
Reality:
No compliance.
Legal Consequence:
Violation of:
Section 73 (Companies Act, 1956)
SEBI (ICDR) Regulations
Court said:
Public money = public accountability.
5. Investor Protection vs Corporate Autonomy
Issue:
Should courts prioritize:
Company’s business freedom OR
Protection of millions of investors?
Court’s stance:
Investor protection = non-negotiable priority
Juris Codex
SEBI acts as parens patriae (guardian of investors).
6. Refund Liability & Enforcement Power
Issue:
Can SEBI force Sahara to refund money?
Judgment:
YES.
Sahara ordered to refund ₹24,000 crore + interest
Lekha News
SEBI given power to enforce recovery
This turned into one of India’s biggest financial recovery
operations.
7. Hybrid Instruments Argument (Rejected)
Issue:
Sahara claimed OFCDs are “hybrid instruments” → outside
SEBI
Hybrid label ≠ regulatory immunity
Lawful Legal
If it functions like a security → law treats it as one.
 SEBI Jurisdiction Over Hybrid Securities: The primary issue was whether Optional Fully Convertible Debentures (OFCDs) issued by Sahara were “securities” and “hybrids” under Section 55A of the Companies Act
 Definition of Public Offer vs. Private Placement: Sahara claimed the issuance to over 30 million people was a private placement. The legal issue was whether an offer made to more than 49 people constitutes a public offer, requiring mandatory listing and compliance with SEBI rules, regardless of the company being unlisted.
 Compliance with Listing Norms: The Court examined whether Sahara violated the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR) by not filing a prospectus for a public offering.
 Investor Protection and Refund Mechanics: The Court addressed the legality of requiring a massive refund of over ₹24,000 crore (including 15% interest) to depositors and the oversight required for this process.

Arguments

Arguments by Sahara India (Appellant)
 Lack of Jurisdiction: Sahara contended that SEBI lacked jurisdiction under Section 55A of the Companies Act because the companies were unlisted, making them exempt from SEBI regulation.
 Private Placement: The company argued that the OFCDs were issued via private placement to friends and employees, not the general public
 Jurisdiction of Central Government: Sahara argued that for unlisted companies, the authority to govern company issues and investor protection lay with the Central Government, not SEBI Arguments by SEBI (Respondent)
 Deemed Public Issue: SEBI argued that because the OFCDs were offered to over 50 people, they constituted a “deemed public offer” under Section 67(3) of the Companies Act
 Investor Protection: SEBI maintained its authority to protect millions of investors
 Security Classification: SEBI asserted that the OFCDs were “securities” under the SEBI Act and SCRA.

Judgement

The Supreme Court judgement in Sahara India Real Estate Corp. Ltd. & Ors vs. Securities and Exchange Board of India (SEBI) (2012), delivered on August 31, 2012, is a landmark
case in Indian corporate and regulatory law that strengthened SEBI’s authority over unlisted companies. The Court ruled that Sahara India wrongly raised over ₹24,000 crore from around 30 million investors through Option Fully Convertible Debentures (OFCDs) under the guise of private placement and ordered a full refund with 15% interest.

Reasoning

 Public Offer vs. Private Placement: The Court determined that issuing securities to over 249 persons makes it a public issue under the Companies Act, 1956
 SEBI’s Jurisdiction (Hybrids/Securities): The OFCDs were classified as “securities” and specifically “hybrids” under Section 55A of the Companies Act, bringing them
directly under SEBI
 Need for Investor Protection: The judgment emphasized that the mechanism was designed to bypass regulatory scrutiny, highlighting the need to protect investors
 Compliance with Securities Laws: The SC ruled that Sahara violated the SEBI Guidelines by not listing the OFCDs on recognized stock exchanges
 Authority of SEBI Orders: The Court upheld that SEBI has the power to oversee, investigate, and punish companies that illegally raise money from the public.

Case – Harshad Mehta Scam Case (1992)

Historical background of case:-
The 1992 Harshad Mehta Scam was a ₹4,000–5,000 crore securities fraud that exposed massive loopholes in India’s banking system, leading to a stock market crash and intense regulatory overhauls. Known as the “Big Bull,” broker Harshad Mehta manipulated bank funds using fraudulent Bank Receipts (BRs) and Ready Forward (RF) deals to fuel an artificial stock market boom, principally focusing on stocks like ACC.

Facts of case

Mehta used forged Bank Receipts (BRs) and fabricated Ready Forward (RF) deals to secure funds from banks (e.g., SBI, NHB), claiming to buy government securities, but instead redirected the funds to his personal accounts.
Market Manipulation: These stolen funds were used to fuel a massive buying spree, causing stocks like Associated Cement Company (ACC) to skyrocket from ₹200 to over ₹9,000.
The Crash: Following the disclosure, the market collapsed, causing immense losses for investors and leaving banks holding thousands of crores in worthless, unsecured claims.

Legal Issues in the case

 Fabrication of Bank Receipts (BRs): Mehta used fraudulent bank receipts from small banks (like Bank of Karad and Metropolitan Cooperative Bank) to secure funds.
 Manipulation of Ready Forward (RF) Deals: The scam exploited loopholes in the inter-bank transfer system to illegally divert funds for personal stock market speculation.
 Constitution of Special Court: The government established a Special Court under a new 1992 Act to ensure speedy trials for offences related to securities transactions.
 Attachment of Assets: The Special Court empowered the Custodian to attach all property and assets of Harshad Mehta and his associates, as highlighted in this 1992 Indian stock market scam.
 Criminal Charges & Conviction: Mehta faced charges of conspiracy, cheating, and forgery.
 Legal Challenges on Procedure: Legal debates occurred regarding the Special Court’s jurisdiction, the legality of pardons given to accomplices, and the validity of the
investigations.

Arguments

Key Arguments & Allegations –
Prosecution/Regulators
 Fake Bank Receipts (BRs): Mehta used fake BRs issued by complicit bankers (specifically Bank of Karad and Metropolitan Cooperative Bank) as collateral to secure large amounts of money from banks, without corresponding government securities.
 Transfer of Funds: Bank funds meant for inter-bank investments were diverted into Mehta’s personal accounts, which he used to inflate share prices of companies like ACC and TISCO.
 Manipulation of Stock Prices: Mehta was accused of manipulating market prices by buying large volumes of shares using borrowed bank money.
 Collusion with Bank Officials: The scam relied on highlevel collusion within public sector banks like SBI and foreign banks like Standard Chartered to facilitate illegal fund transfers.

Key Arguments & Defenses – Harshad Mehta/Defense

 Legitimacy of Deals: Mehta argued that the transactions were part of a “Ready Forward” (RF) deal, which was standard practice, and that he was providing liquidity to the market.
 Systemic Weakness: The defense argued the loopholes existed in the banking and regulatory systems themselves and he only exploited existing oversights.
 No Loss to Banks: According to, the defense claimed that most funds were repaid, and no “monies were lost” by the banks, arguing the allegations were exaggerated.
 Arbitrary “Group Theory”: Mehta’s family challenged the actions of the custodian and income tax department, arguing they were unfairly targeted and that their personal assets should be released because they were not involved in the alleged offences.

Judgement
 Conviction & Sentence: Harshad Mehta was convicted for criminal conspiracy and fraud, particularly in the Maruti Udyog Ltd. case, and sentenced to 5 years of imprisonment in 1999.
 Supreme Court Verdict: Following his death, the Supreme Court confirmed the conviction in 2003 (with a 2:1 majority), though sentences for his associates were often adjusted.
 Asset Attachment: The Special Court, under the Special Court Act, 1992, ordered the attachment of all assets of Mehta and his companies (“notified persons”) to recover funds for banks (e.g., SBI).
 Judicial Approach: Courts stressed the need for strict scrutiny of banks’ involvement (such as fraudulent Bank Receipts) and prioritized returning money to public sector banks over other creditors.
 Multiple Legal Actions: Mehta faced over 72 criminal cases and over 600 civil suits

Reasoning
 Exploitation of Bank Receipts (BRs): Mehta, a renowned broker, exploited the mechanism of BRs, which are legally issued by banks to confirm the transfer of funds through securities. He secured fake or “void” BRs from banks like the Bank of Karad and Bombay Mercantile Co-operative Bank.
 Diversion of Funds: These fake BRs were used to obtain funds from various banks (notably State Bank of India), which were then diverted into the stock market to
purchase shares.
 Market Manipulation: Using these massive, illicit funds, Mehta inflated the prices of specific shares (e.g., Associated Cement Company—ACC—rose from ₹200 to ₹9,000).
 Ready Forward (RF) Deals: He acted as a broker to facilitate Ready Forward deals—a type of short-term lending between banks—but instead of transferring securities, he took the cash and used it for his own trading.

Conclusion

SEBI’s recent reforms reflect a transition toward:
 Unified legal framework
 Technology-driven supervision
 Global regulatory alignment
The proposed Securities Market Code, 2025 is expected to redefine securities regulation in India.
The Securities and Exchange Board of India (SEBI) is the crucial regulator of India’s capital markets, ensuring transparency, investor protection, and fair market practices.
By enforcing regulations on brokers, companies, and mutual funds, SEBI prevents fraud and fosters a safe, modern, and growing investment ecosystem.

Key Conclusions on SEBI’s Role:

 Investor Protection: SEBI’s primary mission is to protect investors from misleading claims and fraud, ensuring 100% fair play.
 Market Regulation: It regulates the market through strict rules, investigating violations, issuing fines, and enforcing, as discussed by Unacademy, according to Angel One, and IJRAR.
 Adaptability: SEBI continually evolves, adopting AI surveillance, regulating new market trends like SME IPOs, and updating its framework for security settlements.
 Authority: It functions as the “grandfather” of the Indian capital market, with power over all market intermediaries.
In conclusion, SEBI is essential for maintaining market stability and trust, making it a critical force in India’s economic growth.

Reference

1. Official & Primary Sources
 Securities and Exchange Board of India (SEBI)
 SEBI Act, 1992
 SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015
 SEBI (Prohibition of Insider Trading) Regulations, 2015
 Annual Reports & Circulars
 Website: https://www.sebi.gov.in
These are your gold-standard citations—always prioritize them.
2. Books
 Securities Law in India – by Taxmann
 Indian Securities Market – by Dr. Vinod K. Singhania
 Company Law – by Avtar Singh
 Use these for concept clarity + legal language polish.
3. Government & Institutional Reports
 Ministry of Finance
 Economic Survey of India (latest editions)
 Reserve Bank of India
 Reports on Financial Stability
 NITI Aayog
 Policy papers on financial market reforms
These add policy-level depth professors love this layer.
4. Journals & Articles
 Economic Times
 Business Standard
 Moneycontrol
 Reuters
Use for recent reforms, amendments, and real-world
examples.
5. Case Laws
 Sahara India Real Estate Corp. Ltd. v. SEBI
 SEBI v. Rakhi Trading Pvt. Ltd.
 N. Narayanan v. SEBI
These show how SEBI actually enforces regulations in practice.
6. Research Websites & Databases
 SCC Online
 Manupatra
 Investopedia