SEBI Fit and Proper Norms Amended: Conviction-Based Test
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
| Situation | Earlier position | April 2026 position |
|---|---|---|
| FIR or complaint filed | Could lead to automatic disqualification | No automatic disqualification |
| Chargesheet filed | Often led to “not fit and proper” status | No automatic disqualification |
| Conviction | Only offences involving moral turpitude | Any economic offence or securities law violation |
| Winding-up | Mere start of proceedings could disqualify | Only 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.