The Securities and Exchange Board of India (SEBI) has announced a comprehensive overhaul of its technical glitch framework for stock brokers, introducing significant changes that will ease compliance burdens and improve operational flexibility for market intermediaries. The revised framework, which comes into effect immediately, represents a major shift from the original rules introduced in November 2022.

Major Scope Reduction for Smaller Brokers

The most significant change involves a substantial reduction in the framework's scope. SEBI has streamlined eligibility criteria to exempt smaller brokers with limited business scale and lower technology dependence. The new framework will apply only to brokers with more than 10,000 registered clients, effectively removing approximately 60% of brokers from the regulatory regime.

Expanded Exemptions and Reduced Liability

SEBI has introduced comprehensive exemptions for various types of technical disruptions. Glitches occurring beyond a broker's control will no longer be covered under the framework, providing immunity from incidents outside their direct influence. The regulator has specifically exempted:

• Glitches originating outside a broker's trading architecture
• Disruptions that do not directly affect trading functionality
• Incidents with negligible impact on operations

This approach ensures that brokers are only held accountable for technical issues within their control and that materially affect their service delivery capabilities.

Enhanced Reporting and Communication Requirements

The revised framework introduces improved transparency measures while easing operational burdens. SEBI has extended the initial reporting timeline from one hour to two hours, factoring in trading holidays and operational realities. The regulator has also shifted from exchange-wise reporting to a centralized Common Reporting Platform, streamlining the submission process.

Brokers must inform both exchanges and clients within two hours of any qualifying incident. Exchanges will disseminate this information on their websites, while brokers must notify clients through multiple channels including websites, SMS, email, or pop-up alerts on trading applications.

Rationalized Financial Structure and Compliance

SEBI has recalibrated the financial disincentive structure, taking into account applicable exemptions, the nature of glitches (major or minor), and the frequency of such incidents. Technology compliance requirements, including capacity planning and disaster recovery drills, have been adjusted based on broker size and technology dependence.

The framework revision follows concerns raised by industry bodies regarding the scope and rigidity of the original rules implemented in November 2022. The regulator had introduced detailed exchange guidelines in December 2022, but subsequent industry feedback prompted this comprehensive review and restructuring of the regulatory approach.

The Securities and Exchange Board of India (SEBI) announced on Thursday a comprehensive simplification of the accredited investor framework for Alternative Investment Funds (AIFs), aimed at reducing operational bottlenecks while preserving essential prudential safeguards. The revised regulations represent a significant step in the regulator's ongoing efforts to enhance ease of doing business in India's capital markets.

Key Changes to AIF Investment Process

Under the new framework, SEBI has introduced flexibility in the timing of accreditation and investment processes. The following table outlines the major operational changes:

AIF investment managers can now finalize and execute contribution agreements with investors even before the latter receive formal accreditation certificates from recognized agencies. However, SEBI has maintained strict controls to ensure regulatory compliance - any commitment made by such investors will not be counted towards the scheme's corpus until accreditation is obtained, and funds can be accepted only after the certificate is issued.

Simplified Documentation Requirements

SEBI has significantly streamlined the documentation process for accreditation based on net-worth criteria. The regulator has eliminated the earlier mandate requiring submission of a detailed break-up of net worth as an annexure to the net-worth certificate. Additionally, chartered accountants now have the flexibility to avoid specifying exact net-worth amounts, provided their certificates confirm that investors meet the prescribed threshold requirements.

Implementation and Compliance Framework

The regulatory changes became effective immediately upon issuance of the circular on Thursday. SEBI has mandated that trustees, sponsors, and managers of AIFs ensure compliance with these revised provisions in their Compliance Test Reports. This requirement ensures systematic monitoring and adherence to the new framework across all AIF operations.

Broader Regulatory Initiatives

These AIF-related changes form part of SEBI's comprehensive initiative to promote ease of doing business in India's financial markets. On the same day, the regulator also allowed stock brokers to undertake activities under the regulatory framework of other financial regulators. This initiative represents part of SEBI's revamped stock brokers' regulations, marking a comprehensive overhaul of norms that were more than 30 years old.

The simultaneous announcement of multiple regulatory simplifications demonstrates SEBI's commitment to modernizing India's capital market infrastructure while maintaining robust investor protection mechanisms. The changes are expected to reduce administrative burden on market participants while preserving the integrity of investment processes.