Meetu Kumari | Apr 22, 2026 |
SEBI Sets 30-Day Deadline To Replace Disqualified Personnel: Know More
The Securities and Exchange Board of India (SEBI) has notified the SEBI (Intermediaries) (Amendment) Regulations, 2026, dated April 16, 2026. This update brings a much-needed overhaul to the SEBI (Intermediaries) Regulations, 2008, refining the “fit and proper” person criteria, a core requirement for anyone operating in the Indian securities market.
The Key Changes are as follows:
| Regulation / Schedule | Subject Matter | Earlier Position | Amended / New Position |
| Regulation 2(1) | Definition of “Days” | The term “days” was not specifically defined in the preliminary section. | “Days” now specifically means calendar days unless the regulations state otherwise. |
| Schedule II, Clause 3 | Scope of Disqualifications | Focused on “not incurring” specific disqualifications, excluding many economic offences. | Now includes convictions for economic offences or securities law violations. Initiation of winding up is no longer an automatic trigger. |
| Schedule II, Clause 3A | Reporting Timeline | No mandatory timeline existed for intermediaries to report “fit and proper” events. | Intermediaries must notify the Board within 15 working days of a disqualifying event occurring. |
| Schedule II, Clause 3B | Due Process | Procedural requirements for a hearing were not explicitly codified in this clause. | A person cannot be declared “not fit and proper” without being given a reasonable opportunity to be heard. |
| Schedule II, Clause 5 | Cooling-off Period | Certain restrictions and regulatory timelines were set at one year. | The one-year period has been shortened to six months to expedite administrative actions. |
| Schedule II, Clause 6 | Group Entity Impact | A group entity’s disqualification could potentially impact the intermediary’s own status. | Adverse findings against an associate or group entity will not affect the intermediary unless they are directly involved. |
| Schedule II, Clause 6 (Provisos) | Remediation Timelines | There were no fixed deadlines for replacing disqualified staff or divesting shares. | Personnel must be replaced within 30 working days. Shareholders must divest or lose voting rights within 6 months. |
Clarification of Timelines and Definitions
Under Regulation 2(1), SEBI has finally put an end to the ambiguity between working days and calendar days by defining “Days” as calendar days unless explicitly stated otherwise. Additionally, in Schedule II, Clause 5, the duration for certain regulatory restrictions and cooling-off periods has been slashed from one year to six months, effectively speeding up administrative timelines for certain enforcement actions.
Expanded Scope of Disqualifications and Due Process
The amendment to Schedule II, Clause 3 marks a shift from looking for a lack of disqualifications to identifying specific “events.” Most importantly, the list of triggers now explicitly covers convictions for economic offences and violations of securities laws. To ensure fairness, Clause 3B introduces a mandatory requirement for natural justice, ensuring that no individual or entity is declared “not fit and proper” without first being given a fair opportunity to be heard.
Mandatory Reporting and Corrective Windows
A new compliance obligation under Clause 3A forces intermediaries to be proactive; they must now notify SEBI within 15 working days if any of their key personnel or promoters hit a disqualifying trigger. Furthermore, Clause 6 sets strict deadlines for house-cleaning: if a key person is disqualified, they must be replaced within 30 working days. For disqualified shareholders, the intermediary must ensure they lose voting rights and exit their holdings within six months.
Decoupling of Group Entities
In a major relief for large conglomerates, Clause 6 clarifies that an adverse “fit and proper” finding against an associate or group entity will not automatically result in the disqualification of the intermediary. The intermediary’s status will remain intact as long as it, or its own key personnel, are not directly involved in the same disqualifying event.
To Read the Full Notification, Click Here
In case of any Doubt regarding Membership you can mail us at [email protected]
Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"
