The Securities and Exchange Board of India (SEBI) has undertaken a comprehensive overhaul of its stockbroker regulations, replacing the three-decade-old framework with modernized rules designed to enhance regulatory efficiency and business operations. The market regulator officially notified the new SEBI (Stock Brokers) Regulations 2026 on Wednesday, replacing the existing 1992 regulations and introducing significant structural and operational improvements aimed at providing ease of compliance and ease of doing business.

Cross-Regulatory Framework Integration

Under the new regulatory framework, SEBI has introduced a groundbreaking provision allowing stockbrokers to operate across different financial regulatory domains. The regulator announced that stockbrokers may now carry out activities under the regulatory framework of other financial sector regulators or specified authorities, as determined by the Board. This cross-regulatory approach represents a significant shift toward integrated financial services regulation, with such activities falling under the purview of the concerned financial sector regulator or authority.

Structural Reorganization and Simplification

The updated regulations demonstrate SEBI's commitment to regulatory simplification through comprehensive restructuring. The new framework has been organized into eleven distinct chapters, providing comprehensive coverage of key aspects governing stockbrokers' operations. This reorganization involved deleting obsolete schedules and integrating relevant provisions directly into the regulations as chapters, significantly improving readability and understanding for market participants.

The overall structure has been streamlined through the removal of repetitive provisions and the consolidation and re-arrangement of sections relating to underwriting, code of conduct, and other activities permitted for stockbrokers.

Enhanced Definitions and Trading Provisions

SEBI has substantially revised key regulatory definitions to provide greater clarity for market operations. The regulator has amended definitions for clearing member, professional clearing member, proprietary trading member, proprietary trading, and designated director. Under the new framework, proprietary trading is defined as trading by a stockbroker in its own account across any segment of a recognized stock exchange, while a proprietary trading member refers to a stockbroker whose trades are exclusively proprietary in nature.

Compliance and Operational Improvements

The new regulations introduce several provisions aimed at easing compliance burden and improving business operations:

Supervision and Compliance Framework

SEBI has rationalized the criteria for identifying qualified stockbrokers, ensuring entities with substantial client bases or higher trading volumes face enhanced supervision and compliance requirements. This risk-based approach reflects the regulator's focus on proportionate oversight based on market impact and operational scale. Reflecting the role of stock exchanges as the first-line regulators, SEBI has revised reporting obligations to streamline compliance processes.

Modernization Through Obsolete Provision Removal

The regulatory update includes the removal of outdated and non-applicable provisions that no longer serve current market realities. SEBI has eliminated references to physical delivery of shares, the Forward Market Commission, and sub-brokers, reflecting the evolution of India's capital markets infrastructure and trading mechanisms.

The comprehensive regulatory overhaul, approved by SEBI's board in December and notified this week, represents a significant milestone in India's financial market regulation evolution, balancing enhanced operational flexibility with robust oversight mechanisms.

The Securities and Exchange Board of India (SEBI) has extended the deadline for implementing the additional incentive structure for mutual fund distributors to March 1, 2026. The framework is designed to encourage the onboarding of new individual investors from locations beyond the top 30 urban centres (B-30 cities) as well as new women investors across all cities.

Implementation Timeline Extended

SEBI announced the extension on Wednesday, pushing back the implementation date from the originally scheduled February 1, 2026. The market regulator made this decision based on feedback from the industry, which cited operational challenges in setting up the necessary systems and processes to ensure a smooth transition. The regulator granted the extension after market participants sought more time to align their internal infrastructure with the new requirements.

Incentive Framework Structure

Under the framework, asset management companies will pay distributors 1.00% of the first lump-sum investment or the first-year SIP amount, up to ₹2,000.00, provided the investor stays invested for at least a year. This commission will come from the 2 basis points AMCs already set aside for investor education and will be paid over and above existing trail commissions.

Eligibility Criteria and Restrictions

Mutual fund distributors will be eligible for additional commission for bringing new individual investors with new PAN from B-30 cities at the mutual fund industry level, and new women individual investors with new PAN from both top 30 and B-30 cities. However, no dual incentives will be allowed for the same woman investor from B-30 cities.

The additional commission will not apply to ETFs, certain Fund of Funds, and very short-duration schemes including overnight, liquid, ultra-short, and low-duration funds.

Strategic Objective and Background

The incentive structure aims to promote wider investor outreach and deepen financial inclusion by encouraging distributors to focus on underrepresented segments. SEBI had earlier provided a framework for incentivising distributors for new investment from beyond the top 30 cities. However, due to concerns of misuse of this framework, based on feedback received from the industry, the regulator decided to revise the incentive structure for distributors for bringing in new investment in mutual funds. The move is expected to help mutual funds expand into under-penetrated markets and attract new investor categories while distributors benefit through higher earnings tied to incremental mobilisation.