SEBI is exploring a graded compliance framework for stockbrokers and risk based guidelines for AI as it looks to simplify regulatory processes without weakening investor protection.
SEBI Chairman Tuhin Kanta Pandey outlined the proposed measures at the Association of National Exchanges Members of India’s (ANMI) 16th International Convention 2026 in Mumbai. The agenda includes digital inspections, more efficient use of brokers’ capital, responsible AI safeguards and simpler onboarding for overseas investors.
The proposals point towards a regulatory approach that takes account of the size, risk exposure and technology dependence of market participants, rather than applying every compliance requirement uniformly.
SEBI’s Graded Compliance Plan for Stockbrokers
Under the proposed framework, compliance requirements would reflect a broker’s business scale, client exposure and reliance on technology. The aim is to reduce unnecessary regulatory costs while ensuring that firms handling greater risks remain subject to appropriate safeguards.
SEBI is also looking to extend the automated give up and take up facility to custodial clients, including portfolio management services (PMS) and alternative investment funds (AIFs), in the cash market.
The mechanism is intended to reduce delays in transaction allocation and prevent brokers’ own funds from remaining blocked while awaiting custodian confirmation. If implemented effectively, it could improve capital efficiency and reduce operational friction for market participants.
The regulator is also reviewing short selling and securities lending and borrowing, while working on a market-making framework to support secondary-market trading in corporate bonds.
Compliance 2.0: SEBI Moves Towards Digital Inspections
SEBI is working to bring its inspection portals into a more unified digital workflow, with the aim of making regulatory inspections faster and more consistent. It is also developing a framework to prevent the misuse of trading terminals, which brokers use to place and manage market orders.
For brokers, a streamlined digital process could reduce repetitive paperwork and make compliance easier to manage. For the regulator, standardised workflows could improve the consistency of supervision and help identify risks more efficiently.
The challenge will be to simplify routine processes without weakening checks around client assets, trading access and operational controls.
SEBI’s Responsible AI Guidelines: What to Expect
SEBI is preparing guidelines for the use of artificial intelligence and machine learning across the securities market. The proposed framework is expected to follow a tiered, risk-based approach, with safeguards including:
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Clear accountability: Regulated entities remain responsible for AI-driven outcomes.
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Data controls: Appropriate governance over the data used by AI systems.
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Kill switches: Emergency mechanisms to stop or disable systems when required.
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Human oversight: People remain involved in monitoring and controlling important decisions.
The approach is expected to align with the International Organization of Securities Commissions’ (IOSCO) AI supervisory toolkit. SEBI has previously consulted on responsible AI and machine learning use in securities markets, and its chairman reiterated in October that the guidelines would be issued shortly. The final rules and implementation timeline should be confirmed once formally published.
SEBI is also exploring an AI sandbox, where new applications could be tested in a controlled environment. Such a framework could help firms assess their tools before wider deployment, while giving the regulator a clearer view of potential risks.
Demat 2.0 and Tokenised Corporate Bonds
SEBI’s broader technology agenda includes Demat 2.0, a pilot for tokenised corporate bonds. The pilot was launched in September 2026, and the regulator said the next phases would extend to buying and selling tokenised bonds through existing request-for-quote platforms, followed by access for retail investors.
Tokenisation uses digital technology to record ownership and service a financial instrument. It does not change the underlying legal nature of the bond or remove existing investor protections. Wider secondary market access could improve trading convenience and liquidity, but the results will depend on market participation and implementation.
Easier Market Access for Global Investors
SEBI is also looking at simpler digital onboarding and KYC processes for global investors, including non-resident Indians (NRIs). The aim is to reduce paperwork and make participation in Indian markets more convenient while retaining necessary safeguards.
Taken together, the proposals show a two-part regulatory priority: reduce friction for market participants where processes can be simplified, and strengthen oversight where technology creates new risks. For brokers and fintech firms, the practical impact will depend on the final rules, the compliance requirements assigned to different risk categories and how quickly the changes are implemented.
