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SEBI Fit and Proper Norms Amended: Conviction-Based Test

18 April 20261 min read
BANKING & FINANCESEBI Fit and ProperNorms Amended:Conviction-BasedTest18 April 2026safalsetu.com

Why in the news

SEBI revised who counts as fit and proper to work as a market intermediary, shifting from disqualification on mere suspicion to disqualification on proven outcomes.

Before and after

SituationEarlier positionApril 2026 position
FIR or complaint filedCould lead to automatic disqualificationNo automatic disqualification
Chargesheet filedOften led to “not fit and proper” statusNo automatic disqualification
ConvictionOnly offences involving moral turpitudeAny economic offence or securities law violation
Winding-upMere start of proceedings could disqualifyOnly an actual winding-up order by a court or tribunal

Procedural changes

  • Natural justice: an explicit right to a reasonable opportunity of being heard before being declared not fit and proper.
  • Wider conviction net: specific violations of the SEBI Act, SCRA and the Depositories Act count even without moral turpitude.

Significance

  • Prevents “weaponisation” of legal complaints against intermediaries.
  • Protects business continuity during long court battles.

Exam angle

  • Date: April 15, 2026; regulator: SEBI.
  • Principle in play: natural justice.
  • Acts named: SEBI Act, SCRA (Securities Contracts Regulation Act) and the Depositories Act.

Test yourself

1. Under SEBI's revised Fit and Proper norms, which event no longer causes automatic disqualification?

FIRs, complaints and chargesheets no longer trigger automatic disqualification.

2. On what date did SEBI notify the amended Fit and Proper Person criteria?

The amendments were notified on April 15, 2026.

3. Which legal principle is reinforced by SEBI giving a reasonable opportunity of being heard before disqualification?

A hearing before a declaration of 'not fit and proper' reflects natural justice.