The Securities and Exchange Board of India (SEBI) has announced its new regulations governing the process of making, amending, and reviewing regulations within the securities market. Published in the Extraordinary Gazette of India on February 13, 2025, these regulations aim to foster greater public engagement and ensure a more systematic approach to policy changes.
Public Consultation: A Cornerstone of the Process
One of the most notable features of SEBI’s new regulations is the emphasis on public consultation. This is in line with SEBI’s broader goal of making its regulatory processes more transparent. Under the new rules, before any regulation is finalized, SEBI is required to publish the draft proposal on its official website, inviting comments from the public.
These draft proposals must include:
- The suggested changes to existing policies.
- The legal provisions enabling the proposed regulations.
- A statement outlining the regulatory intent and objectives of the proposal.
- A clearly defined process, including timelines, for receiving public comments.
- For most regulations, a minimum of 21 calendar days will be allocated for stakeholders to provide their feedback. This ensures that those who will be directly affected by these changes, including investors, issuers, and market regulators, have sufficient time to voice their opinions.
The Role of the Board in Approving Regulations
Once the public consultation process is completed, SEBI’s board will review all the comments received. The regulatory team will compile these comments, along with their rationale for any rejections, and submit this documentation to the board. The board will then consider these proposals during its meetings in accordance with the Securities and Exchange Board of India (Procedure for Board Meetings) Regulations, 2001.
If the proposals are deemed to be in the best interest of the market, they will be approved and published as regulations. This systematic review ensures that the regulations are well-thought-out and that stakeholder feedback is adequately considered.
- Fast-Tracking Regulations in Exigent Cases
In situations where quick action is deemed necessary to protect the interests of investors or ensure the development of the securities market, SEBI can fast-track certain regulations. The new rules allow the chairperson to bypass the public consultation process or shorten the feedback period if it is believed that doing so will serve the best interests of the market. However, such instances will be disclosed to the board to maintain oversight.
This provision acknowledges that while public consultation is important, there are scenarios where delay could harm market participants. Thus, SEBI aims to strike a balance between due process and timely intervention.
- Amendment and Review of Existing Regulations
The new regulations also lay down a detailed procedure for amending existing regulations. When amendments are proposed, they will be subjected to the same public consultation process. Additionally, SEBI’s departments are required to periodically review existing regulations. This review will be based on various factors, such as the regulations’ effectiveness, global best practices, and changes in market dynamics.
This ongoing evaluation ensures that the regulatory framework evolves with the changing landscape of the securities market and continues to serve its intended purpose efficiently.
- Exemptions and Savings
The new regulations also include provisions for exemptions in specific cases. Internal organizational matters of SEBI, such as those relating to the administration of its meetings or the service conditions of its employees, will not be subject to the procedures outlined. Furthermore, the regulations will not apply to amendments or proposals for which public comments have already been sought or received before the new rules came into effect.
Moreover, any regulations that are already in force when the new regulations come into play will remain valid until amended, repealed, or replaced.
