SEBI Regulatory Framework: What Every Investor Must Know

Most investors meet SEBI only as a word in a disclaimer. Then one day a stock they own is moved to a surveillance list, or a broker changes how its API works, or a friend forwards a "sure shot tip" on a messaging app, and SEBI is suddenly very real. I spend a lot of my working life inside SEBI's rulebook, and my honest view is that it is the main reason an ordinary Indian investor gets a reasonably fair deal today. This module is the parts of it that touch your own account.

SEBI: structure and powers

The Securities and Exchange Board of India was set up in 1988 and given statutory powers by the SEBI Act, 1992. It is headquartered in Mumbai and has three jobs written into the Act: protect investors, develop the securities market, and regulate it.

Its board has a chairman, two members from the central government ministries dealing with finance and company law, one member from the RBI, and five other members, at least three of them whole time. SEBI funds itself from fees paid by the market, not from the budget.

What makes it unusual is that it combines three kinds of power. It writes regulations (quasi legislative), investigates and inspects (executive), and hears cases and passes orders (quasi judicial). A SEBI order can carry a penalty, a disgorgement of profits or a ban from the market. Appeals go to the Securities Appellate Tribunal within 45 days, and from there to the Supreme Court.

Key regulations every investor must know

LODR, 2015: what listed companies must tell you

The Listing Obligations and Disclosure Requirements make a listed company disclose material events to the exchanges promptly: results, acquisitions, defaults, changes in auditors or key people, related party transactions above set limits. Board and audit committee structure, shareholding patterns and annual reports are all public because of LODR. When you read a company filing on the NSE or BSE site, you are reading LODR at work.

PIT, 2015: insider trading

Trading while in possession of unpublished price sensitive information is prohibited, and so is passing it on. Results before they are announced, a merger, a large order win, a regulatory approval: all of it is UPSI until it is public. The definition of an insider is wide. It reaches anyone who has the information, not only directors and employees. The penalty under the SEBI Act runs from ₹10 lakh up to ₹25 crore or three times the profit made, whichever is higher, and criminal prosecution is possible.

PFUTP, 2003: fraud and manipulation

Front running, pump and dump schemes, spoofing (placing orders you never intend to fill) and layering are all prohibited. Exchange surveillance systems watch for order patterns, not just prices. An algo that places and cancels thousands of orders without trading will draw questions whatever its intention.

SAST, 2011: takeovers

Anyone who reaches 5% of a listed company must disclose it, and every further 2% change after that. Crossing 25% triggers an open offer to the other shareholders, and holders above 25% can add only 5% a year without one. For a minority shareholder, SAST is why a quiet change of control cannot happen behind your back.

Insider trading: the rules you didn't know applied to you

Three ideas cover most real situations.

• UPSI is broad. Anything not yet public that would move the price: results, dividends, deals, appointments, approvals, the loss of a key customer.
• Insiders are broad too. Employees and directors, their relatives, consultants, auditors, bankers, and anyone who receives the information from them.
• Companies close a trading window for designated persons around results. Trading in that window by those persons is itself a violation, even with no information.

Surveillance looks for clusters: unusual buying just before an announcement, by people linked to each other. Phone records and messages can be part of an investigation. "I didn't know it was inside information" is a weak defence when the timing says otherwise.

Investment adviser, research analyst, educator

Both regulations were amended in December 2024. SEBI also barred registered entities from associating with unregistered persons who give advice or claim returns, with effect from 29 August 2024.

The line is about what you are told to do, not about the topic. "This is how a quality factor is measured" is education. "Buy this stock for a 20% move" from someone unregistered is not allowed.

Recent SEBI reforms, 2023 to 2026

1. Jan 2023T+1 settlement for all stocks

   Shares and money move the next working day.

2. Mar 2024Optional T+0 begins

   Widened to the top 500 stocks from January 2025.

3. Apr 2024SCORES 2.0

   21 day resolution, automatic escalation, two levels of review.

4. Nov 2024Index F&O tightened

   One weekly expiry per exchange, ₹15 lakh minimum contract, extra margin on expiry day; upfront premium from February 2025.

5. Jan 2025Education without live tips

   Educators may not use the last three months of prices to recommend.

6. Oct 2025Block deals revised

   ₹25 crore minimum, two windows, plus or minus 3%.

7. Apr 2026Retail algo framework fully live

   Static IP, daily login, algo tagging for every API order.

8. Aug 2026Closing Auction Session

   The close of F&O stocks is set by an auction; the pre-open aligned from 7 September.

SEBI circulars and NSE notices of the dates shown.

Read the list as one story. Settlement got faster, complaints got deadlines, speculation in index options got more expensive, education got separated from advice, and the open and the close became auctions. Each change shifted a little power from the fastest participants to ordinary investors.

How a complaint travels

1. Raise it with the entityYour broker, fund house or adviser first.
2. File on SCORESThe entity must resolve it within 21 days.
3. First reviewBy the designated body, such as the exchange or depository.
4. Second reviewBy SEBI, if you are still not satisfied.
5. Online dispute resolutionConciliation, then arbitration, through the market's ODR portal.

What happens when SEBI investigates

1. A flag. Exchange surveillance spots an unusual pattern and reports it.
2. Enquiry. SEBI asks for an explanation and records: contract notes, bank statements, communications.
3. Show cause notice. If SEBI sees a case, it sets out the charges. You reply in writing and can ask to be heard.
4. Order. An adjudicating officer or a whole time member passes an order: no action, warning, penalty, disgorgement or a market ban.
5. Appeal. To the Securities Appellate Tribunal within 45 days, then the Supreme Court.

These cases take years, not weeks. The cheapest defence is never needing one: keep your trading explainable, keep your records, and keep your phone out of tips.

Common mistakes

• Forwarding a "tip" that turns out to be inside information. Passing it on is a violation too.
• Paying an unregistered person for stock calls. You lose SEBI's protection and complaint routes.
• Ignoring SCORES. A written complaint with a deadline gets more attention than a phone call.
• Assuming a registration number on a website is real. Check it on SEBI's intermediary list.

How this shows up in RupeeCase

RupeeCase is a technology platform. It is not a fund, a PMS or a SEBI registered investment adviser, and it does not give personal advice. Each index is a published set of rules with a model, back tested history; your stocks stay in your own demat through a SEBI registered broker, and RupeeCase never holds your money. The exact regulatory position is set out on the disclaimers page, and the way an index works is on each strategy page, such as Large Midcap.

Questions people ask me

What to remember

• SEBI writes rules, investigates and adjudicates. Appeals go to SAT within 45 days.
• Insider trading rules reach anyone with unpublished price sensitive information.
• 5% stake disclosure, 25% open offer.
• Advice needs registration; education may not recommend on recent prices.
• SCORES gives every complaint a 21 day clock.

Rules and figures in this module were last verified on 12 Oct 2026. Tax and regulatory rules change; check the source before acting.