Stock Brokers Can Take Up Other Regulated Activities Under SEBI's New Regulations

Stock brokers can now take up other regulated financial activities, with approval, after the market regulator notified a fresh set of regukations that replaces the three-decade-old framework governing the broking industry. The Securities and Exchange Board of India (Stock Brokers) Regulations, 2026, notified on Wednesday, formally repeal the 1992 regulations and bring all broker-related obligations under one consolidated rulebook. Under the new regulations, brokers are allowed to carry out activities that fall under the regulatory domain of other financial regulators or authorities, provided those activities are permitted and follow conditions laid down by SEBI. Such activities will continue to be governed by the regulator that oversees that space. At the same time, SEBI has raised the bar on who can operate as a stock broker. Anyone applying for registration will now need at least two years of experience in trading or dealing in securities. Earlier, the regulations only required past experience, without setting any minimum threshold. Another new condition requires every broking firm to have at least one designated director who resides in India for 182 days during a financial year. Existing brokers have been given six months from the date of notification to comply. Brokers have also been asked to retain records for longer. The period for maintaining books of account and other records has been extended from five years to eight years, a move aimed at strengthening audits and post-event scrutiny. The regulations also expand the list of changes that brokers must report to SEBI. These include changes in control, designated directors, key managerial personnel, compliance officers, the firm's name or registered office, and situations where net worth falls below the prescribed minimum. The explanation to the regulation lists these as material changes and also includes cases where a broker no longer meets the fit and proper requirement. Investor grievance timelines remain unchanged. Brokers must continue to resolve complaints within 21 calendar days, as under the earlier regulations. SEBI has also put a sharper focus on fraud and market abuse. Brokers are now required to put systems in place to detect, prevent and report suspicious activity by clients, employees or authorised persons. If potential fraud or misuse is spotted, stock exchanges must be informed without delay. Brokers will also have to submit half-yearly reports explaining what was flagged and what action was taken. A written whistle-blower policy, with a confidential reporting channel, is now mandatory. The regulations also clearly spell out what brokers cannot do. They are barred from running schemes that offer “indicative, guaranteed, fixed, or periodic returns,” from operating unauthorized collective investment or portfolio management schemes, and from accepting cash from clients, either directly or through bank deposits. Financial thresholds have also been revised. Minimum net worth requirements now range from Rs 1 crore for trading members to Rs 50 crore for professional clearing members. The penalty for delayed payment of fees has been changed as well. Instead of an annual rate, interest will now be charged at 1 percent per month for the period of delay. SEBI has clarified that registrations, inspections, and investigations that were already underway under the 1992 regulations will continue under the new regulations. The older framework stands repealed from January 7, 2026.Click Here To Read/Download Notification

Stock Brokers Can Take Up Other Regulated Activities Under SEBI's New Regulations

Manu Sharma

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