SEBI plans graded compliance for stockbrokers and safeguards against terminal misuse

The Securities and Exchange Board of India is preparing a graded compliance framework for stockbrokers alongside new safeguards against trading terminal misuse, aiming to strengthen market integrity while easing the regulatory burden on smaller firms.

Addressing the 16th ANMI International Capital Market Convention in Mumbai, SEBI Chairman Tuhin Kanta Pandey set out a comprehensive roadmap focused on four core pillars: simpler rules, deeper markets, responsible technology, and wider retail access. Under the graded model, regulatory requirements will be tailored to a broker's operational scale, client exposure, and reliance on technology.

To improve capital efficiency, SEBI is extending its automated give-up and take-up facility in the cash segment to custodial clients, including Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs). Following recommendations from the Industry Standards Forum, the move prevents brokers' funds from remaining blocked while awaiting custodian confirmation.

Capital market growth and key metrics

Pandey pointed to the rapid development of India's capital market infrastructure, which has progressed from paper certificates to T+1 settlement, interoperable clearing corporations, and pledged-repledged security systems. This transformation is backed by sustained macroeconomic momentum, with International Monetary Fund estimates projecting Indian economic growth at around 7 per cent—more than twice the global pace.

To streamline supervision, SEBI is bringing its inspection portals into a single digital workflow. Additionally, the Samuhik Prativedan Manch will cover depositories, allowing intermediaries to file single submissions for both exchanges and depositories.

Artificial intelligence and terminal safeguards

As technological adoption accelerates, SEBI is establishing safeguards to mitigate operational and cybersecurity risks. The regulator is introducing an AI sandbox for testing new tools in controlled settings, while finalising responsible AI guidelines featuring clear accountability standards, data controls, human oversight, and mandatory kill switches.

SEBI is also creating explicit frameworks to curb trading terminal misuse and tackle fraudulent practices, such as unregistered financial influencers and entities impersonating legitimate brokers. Measures like validated UPI handles, the SEBI Check facility, and verified labels for trading apps are being deployed to protect investors.

To deepen liquidity beyond equities, SEBI is reviewing short selling and securities lending rules, introducing a market-making framework for corporate bonds, and enabling tokenised bond trading under Demat 2.0. Digital onboarding and simplified KYC processes are also being expanded for non-resident Indians and global investors to sustain long-term capital inflow.