The Securities and Exchange Board of India (SEBI) on Monday approved amendments to the “fit and proper person” criteria for intermediaries, easing certain rule-based disqualifications while strengthening principle-based oversight.
The changes to the norms are aimed at balancing regulatory scrutiny with ease of doing business, ensuring that only individuals with integrity and ethical conduct participate in the securities market without imposing undue restrictions.
A key change is that the mere pendency of a criminal complaint, FIR filed by SEBI, or a chargesheet related to economic offences will no longer automatically disqualify an applicant or intermediary. Instead, such cases will now be assessed on a case-by-case basis under broader principle-based criteria.
At the same time, SEBI has expanded disqualification triggers to include convictions for any economic offence or violations under securities laws, in addition to offences involving moral turpitude.
Disqualification norms
The regulator has also removed initiation of winding-up proceedings as a ground for disqualification, although an actual winding-up order will continue to attract ineligibility.
Intermediaries will now be required to inform SEBI and stock exchanges within 15 working days of any material developments involving themselves, key managerial personnel or persons in control that may affect their eligibility status.
SEBI has also introduced an explicit provision to grant entities a reasonable opportunity of being heard before they are declared unfit.
The Board has also reduced the period during which applications are kept in abeyance following issuance of a show-cause notice from one year to six months, and limited such cases to specific proceedings under the SEBI Act.
The default five-year bar on reapplying for registration, where no timeline was specified, has been removed.
The amendments will come into force upon notification in the Official Gazette, with SEBI indicating that pending cases may be reviewed under the revised framework.