Author name: CBCL

[By Ayushman Shrivastava] The author is a student of Hidayatullah National Law University (HNLU), Raipur. Introduction On 22nd September 2025, the Securities and Exchange Board of India (‘SEBI’) released a consultation paper on Review of Framework for ‘Technical Glitches’ in Brokers’ Trading Systems (‘Consultation Paper’), proposing revisions to its framework for managing technical glitches in brokers’ electronic trading systems. This is an effort to tweak an already existing regulatory regime (‘2022 Framework’), that has been operational since November 2022. The new proposals do not introduce new compliance burdens, but rather aim to adjust the balance between the protection of the investors and the practical realities of running a brokerage company. SEBI through these changes, signal a shift towards more precise and proportionality of regulation by reducing the definition of a technical glitch, confining the framework to bigger brokers, and streamlining the reporting mechanisms. This rethinking has to be understood in the light of the 2022 Framework. Back then, SEBI was following the approach of unveiling a comprehensive framework for all brokers with detailed guidelines released by stock exchanges a month later. The framework mandated prompt reporting of technical glitches, imposed penalties for defaults, and treated all disruptions, whether technical or otherwise, as the broker’s responsibility.. While this seemed investor-centric, it quickly came under scrutiny for being too prescriptive. Brokers resented being penalized even for disruptions that resulted from circumstances beyond their control, such as cloud service provider outages or payment gateway issues. Smaller brokers who had little technology infrastructure also felt compliance unproportionately burdensome. This article will critically examine the recent consultation paper on technical glitches by SEBI, and not just the gloss of the reforms it has offered. The redefinition of what should be considered a technical glitch seems to be exact, yet it risks absolving brokers of responsibility for disruptions that would affect investors outside regular trading hours. Equally, SEBI’s decision to exempt small brokers from the framework in the name of proportionality could inadvertently create a patchwork of regulation, leaving retail investors at the mercy of their brokers depending on size. Although the fact that reporting is being centralized and penalties are being softened is an indication of progress, the same changes can also lead to lack of accountability, as they put the burden of self-assessment and internal controls directly on the brokers. Finally, this article raises the question of whether the re-calibrated method of SEBI is sufficient in protecting the interests of investors or is too focused on regulatory convenience and industry comfort, which may compromise the integrity of the market. Glitches Redefined: Fine-Tuning Oversight or Diluting Accountability? SEBI’s idea to restrict the scope of what can be called a “technical glitch” marks one of its most consequential changes in the new Consultation Paper. Under the proposed definition, only malfunctioning during trading hours that are directly hindering trading or risk management (such as login failures, errors in placing orders or margin allocation) will fall into the regulatory net. Substitutions or failures that take place because of cloud service providers, banks, payment gateways, KYC onboarding, back-office systems, or analytical tools are specifically excluded. This seems like a logical change over the 2022 Framework, which unfairly burdened brokers with liability for things they cannot control. However, the accuracy of this new definition is purchased at a price. By excluding such broad areas of disruptions as “non-glitches”, SEBI risks undermining accountability in ways that have a direct bearing on investors. Take the example of payment gateway failures: while they are not trading, they can cause customers to miss their chance to be able to deposit their accounts in time and therefore lose out on trades, or worse, put them at the mercy of market volatility. There is also a temporal blind spot. By ignoring after-hours glitches, SEBI assumes that risks are confined to market hours. In reality, modern trading never really stops. Investors keep preparing strategies, transferring funds, and analysing their positions long after the trading bell has rung. A systemic outage at 6 p.m. may not register under SEBI’s framework, but it could undermine trading decisions the next morning. The underlying tension is apparent: SEBI does not wish to unfairly penalize brokers, but in doing so, it threatens to impose the burden of technological weakness on investors themselves. Overcorrection in regulation towards intermediaries can ultimately destroy trust in the very markets it aims to stabilize. Accuracy of definition must not be a codeword for avoidance of responsibility. Applicability and the Two-Tier Market: Proportionality or Privileged Protection? One of the most striking proposals in SEBI’s consultation paper is the narrowing of the framework’s applicability. Under the revised regime, only brokers offering Internet-Based Trading (IBT) or Securities Trading Using Wireless Technology (STWT) platforms with more than 10,000 registered clients as of March 31 of the preceding financial year will be covered. By SEBI’s own estimates, this would exempt around 457 smaller brokers from the compliance obligations. This threshold has been set by SEBI with reference to proportionality. But the larger and more technologically intensive a broker is, the more systemic its impact. Smaller brokers with few clients are not levied with an excessive compliance charge. Theoretically this is a fair difference. The migration, however, is risky due to the fact that it will create a two-tier marketplace which will act as a safeguard to investors. While large brokerage firms’ customers will be able to take advantage of the improved glitch awareness, tracking, and enforcement of noncompliance. Meanwhile, clients of smaller brokers will remain frustrated by an ineffectively designed system. There are namely three problems with this split. Firstly, these thresholds can create perverse incentives for regulatory gaming companies who are hovering over the 10,000-client threshold to not to expand their client base so that they do not have to pay to comply, and therefore ultimately restricting their own growth. Secondly, this kind of approach will generate informational asymmetry. The bugs between the exempted brokers are going to be less visible to regulators but will keep causing enormous damage to

[By Aditya Kumar and Samridhi Singh] The authors are students of Chanakya National Law University, Patna Introduction In the era of online campaigns and global movements, corporate entities have found a place for themselves to engage with the larger social discourse either through their strong advertising campaigns or their ESG commitments. What has become a trendy PR activity for most companies, especially post the success of the Nike campaign on the lines of Black Lives Matter, was initially set out to instil a sense of broader responsibility towards society and governance. This is precisely where the threat of purpose washing knocks at the door of corporate giants, with the tide turning on their faces in several instances when their practical actions fall short of their larger PR budgets. Companies like Gillette, Coca-Cola, and McDonald’s have done their fair share of what is known as Woke Washing, a subset of Purpose Washing apart from Greenwashing. Although these terms have minute differences, they share the common thread of inconsistent action when it comes to purposes beyond profit maximisation. Purpose washing, as defined in the Securities Exchange Board of India (“SEBI”) Circular titled ‘Framework for Environment, Social and Governance (“ESG”) Debt Securities (other than green debt securities)’ (hereinafter referred to as the “SEBI Circular”) dated June 05, 2025, refers to false, misleading, unsubstantiated, or otherwise incomplete claims regarding the purpose of issuance of bonds. The SEBI Circular, in pursuance of the Circular dated December 2024 and Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“NCS Regulations”), introduced the regulatory framework for social bonds, sustainability bonds, and sustainability-linked bonds. Notably, one of the regulatory parameters covered the compliance for curbing purpose washing in cases of issuance of social and sustainability bonds. The SEBI Circular on ESG Debt Securities excludes sustainability-linked debt securities from the ambit of compliance, and it mandates keeping purpose washing in check. This specific lacuna, apart from the others, poses a serious threat to the overall purpose of the Circular itself. With this premise, the article explores the regulatory compliance for sustainability-linked debt securities and critically evaluates the void in the framework curbing purpose washing. Differing Compliances for Debt Securities ESG Debt Securities, other than green debt securities, are largely distinguishable from each other on the basis of the primary objective for which they are to be utilized. Social bonds, on the one hand, are utilized for social projects initiated to alleviate a social issue (a list of which is mentioned in the SEBI Circular). Sustainability bonds are issued for financing or refinancing of green projects and social projects as defined in the Circular. However, the third category of debt securities, i.e., sustainability-linked debt securities, does not have any set parameters of activities or objectives for which it is issued. These instruments address the predetermined goals of the issuer, furthering their broader sustainability objectives. Contrary to social and sustainability bonds, which are ‘use proceeds’ and are utilized for a specific purpose, sustainability-linked bonds attend to the sustainability goals of the issuer itself. Due to the differences in the nature of the debt security, the compliance that follows also differs significantly. Sustainability-linked debt securities are measured using Sustainability KPIs against predefined Sustainability Performance Targets (SPTs). The initial disclosures to be made by the issuers of sustainability-linked bonds revolve around the rationale for the issuance and its consistency with the broader sustainability strategy of the issuer. Moreover, the details of the KPIs and SPTs, and their modus operandi for carrying out risk assessment, need to be disclosed initially. The issuer, under this, can also elect an ESG committee in order to monitor the performance under the issuance of debt securities. These initial disclosure compliances differ significantly from those of social and sustainability bonds as they are more inward-looking in nature. They demand contemplation and introspection from the issuer as it functions as its own assessor while achieving the sustainability targets defined by it. The compliances enable the issuer (who is more of a self-serving referee in this case) to play from both sides of the fence Where the reality differs from this presupposition is when the independent third-party report surfaces in the continuous disclosures filed by the issuer. As opposed to the use proceeds, where the majority of post-issue compliance obligations revolve around reporting the utilization of the proceeds and their subsequent social impact, KPI-based securities depend on the international standards for post-issue compliance. The predicament with international standards arises from the leniency granted by the regulator to issuers in choosing the standard they wish to comply with. Certain standards, like indicators of the European Union, present a discrepancy in the compliance requirement for green bonds and sustainability-linked bonds, where, on one hand, for the former, it offer robust protections to investors, and for the latter, the disclosure requirements remain voluntary in nature. This, in pursuance of the prior heavy-handedness of the issuer in the initial disclosure, puts the investor in a dubious situation. Essentially, it demands that the investor be active in ascertaining the protections offered by the international standard to be adopted by the issuer, as mentioned in the offer document, along with the report of the reviewer for the issue of sustainability-linked debt securities. The curious case of purpose washing Although it appears that the SEBI Circular intends to remain consistent with the international standards by requiring SPTs to be ambitious and material, it fails to maintain a robust mechanism to keep the threat of purpose washing in check. Interestingly, the compliance mentioned in the Circular to curb purpose washing does not require any such compliance on the part of issuers of sustainability-linked bonds. For debt securities with the flexibility and lack of end-use restrictions, like that of sustainability-linked bonds, a complete absence of adherence to any set of rules for purpose washing puts investors in a turbulent position, as the fluctuations in the interest rates on these bonds rely on the fulfillment of the targets set by the issuer. Considering the overbearing

[By Kushagra Prasad] The author is a student of Gujarat National Law University Introduction: Governance Gaps in MIIs Market infrastructure Institutions of India, including the stock exchange, clearing corporation, and depositories, have come under increasing scrutiny for their governance structures. Keeping in mind their strategic positioning within capital markets and possible conflict of interest, the Security Exchange Board of India (SEBI) issued a consultation paper on 24 June 2025 that required the appointment of two distinct Managing Directors (MD) level professionals: one to manage core business and trading, and another for risk, compliance and investor grievance-related functions. The additional officer will be an independent board member, standing equal to current MDs, and will report quarterly to the MII board and SEBI. This change addresses long-standing issues that MIIs have had, such as too much power vested in one MD-led system, and has reduced oversight of critical compliance and risk activities. SEBI seeks to strengthen internal control, minimize conflict of interest, and ensure board-level attention to core regulatory activities by splitting up senior leadership. Can introducing the dual C-suite model enhance and align India’s MIIs with global standards? This blog piece analyses whether such a change can help increase institutional integrity and investor trust, or run the risk of operational difficulties and boardroom disharmony. Policy Genesis and SEBI’s Justification The proposal for SEBI’s dual C-Suite model for MIIs is far from arbitrary. It emerges as a conscious response to a trio of pressing governance challenges. Firstly, the rising complexity in derivatives markets means that existing single-headed executive structures struggle to maintain adequate risk oversight. With the growing sophistication in derivative instruments, MIIs need specialized executive roles to parallel manage trading, counterparty risks, compliances, and technology. Secondly, the failure of investor protection, such as misreporting, privileged trading access, and poor internal controls, has heightened the conflict-of-interest risk inherent in vested executive arrangements. The consultation paper suggests that segregated leadership should be used to make sure that risk and compliance are not secondary to commercial objectives. Thirdly, risk oversight failures have flagged that accountability under a single MD/DEO often becomes opaque. SEBI analysis concludes that operational priorities can overshadow critical risk posture without bifurcation. These core concerns are reflected in the consultation paper: The regulator directs quarterly meetings barring the MD/CEO, allowing autonomous board-level executives to assess risk and governance concerns without commercial bias. It demands appointment of independent board-level executive directors handling core verticals, one for operations/trading and another for risk/compliance, each with voting rights at the board level and equal standing to the MD. It also institutes a direct reporting channel for SEBI, with the new Executive Directors (Eds) submitting quarterly reports to the board and the regulator. They will meet SEBI’s regulatory/risk committee separately, ensuring transparency and eliminating bottlenecks. By advocating the separation of faces of governance, operational leadership at one end, risk/compliance leadership at the other, autonomous board oversight, and quarterly regulatory interaction, SEBI seeks to eliminate loopholes within internal checks and accountability. This disciplined approach aligns MIIs with worldwide checks & balances practices: independent directors empowered, separation of essential responsibilities, and emphasis on regulatory openness. The outcome is a regulatory structure set to maintain investor confidence, raise risk resilience, and avoid conflicts, without sacrificing the growth and innovation of India’s increasingly complex financial markets. Comparative Governance Lens The MIIs reflect an increasing prioritization of independence and risk mitigation globally, particularly within C-suite leadership roles. The UK’s ring-fencing model stands as a classic example. Since 2019, central UK banks have been required to ring-fence all core retail banking activities from riskier investment banking operations. This architecture demands legal and operational separation and imposes ring-fenced governance structures empowered to act independently, ensuring safeguard of retail banking against plague from the group’s wider exposures. Governance is operationalized through differentiated management teams, board committees, and, crucially, distinct Chief Risk Officer (CRO) roles assigned with autonomous oversight of ring-fenced entities. The CRO is protected from any undue influence by other business segments, reflecting the country’s commitment to functional risk management through structural independence.Similarly, the US markets are subject to tightly controlled dual regulation by federal and state governments, with exchanges being multi-layered and supervised by the Securities and Exchange Commission (SEC) and other organizations. This divided regulatory environment ensures that executive risk functions, such as CROs, are subject to internal checks and external supervision, thus dispersing concentrated power and making the market participants accountable. US exchanges should be required to identify compliance and risk roles with direct reporting lines to independent board committees, further enhancing transparency and responsible risk-taking. Turning to the Indian baseline, SEBI’s existing governance climate already reflects a degree of functional segregation, for instance, by excluding Managing Directors from audit committee chairs. Still, the consultation paper underscores that current practices vest overarching authority in the MD, potentially diluting operational, risk, or compliance oversight. The proposed dual C‑suite mechanism strengthens this segregation by mandating that each ED matches the MD in stature, reports directly to the governing board and SEBI, and is prohibited from holding external board positions beyond narrow exceptions. Expected Benefits v. Practical Challenges The model can potentially change MIIs like stock exchanges, clearing corporations, and depositories. On the positive side, it strengthens in-house checks and inculcates a more focused attention to risk. By keeping one ED to oversee essential operations (trading, clearing, settlement) and another to lead regulatory, compliance, risk management, investor grievance, the structure builds redundancy into the leadership pyramid, bolstering oversight in areas prone to systemic failure. In addition, SEBI’s framework encourages more transparent governance and balanced budgets. EDs will be required to report to Sebi and the governing board every three months resulting in greater board-channel confidence and higher investor trust. With this, the perceptions of investors are likely to improve. MIIs will appear less profit‑motivated and more utility‑led, increasing retail and institutional credibility. This also pre-empts frequent SEBI notices cautioning against over-commercializing MIIs, pointing to increasing dividends and profit margins, by reasserting their public‑utility purpose. That said, ambition could run counter to implementation.

[By Anikait Chawla and Chinmaya Saraswat] The authors are students of Gujarat National Law University On 7 August 2025, the Securities and Exchange Board of India released a consultation paper called, “Proposals for Ease of Doing Business for Investment Advisers and Research Analysts” (the Paper). The Paper aims to lower procedural barriers for advisers and analysts while keeping investor protections in place. It builds on changes from December 2024 that gave advisers more fee flexibility and cleared up onboarding steps. The Paper addresses six persistent market concerns: the limited ability to share past performance, unclear rules on second-opinion services, short corporatization timelines, narrow qualification criteria, and repetitive documentary checks. SEBI tied these easing measures to safeguards such as certification, disclaimers and time limits. The regulator wants to make life easier for advisers while keeping verification where it matters. 1.Regulatory backdrop and principal proposals The Investment Advisers Regulations, 2013 (IA) and the Research Analysts Regulations, 2014 (RA) set rules for who may advise, how research should be published, and what disclosures advisers must make. Those rules helped professionalise a market that had relied on informal practice. As advisory work evolved, the rules showed strain. Firms and solo advisers report repeated documentary checks, academic thresholds that block experienced practitioners, and disruption when individuals convert to a corporate form. Small advisers feel these burdens most because they lack in-house compliance teams. SEBI responds with a significant change aimed at broadening eligibility. Any graduate could register if they pass the relevant NISM exam. That keeps a baseline of competence while allowing more professionals to enter the market. The Paper would permit one-to-one sharing of certified past-performance data when a prospective client requests it. Advisers may present certified results to interested clients, with mandatory disclaimers and a time-limited allowance. The approach lets advisers show a genuine track record without enabling mass-market promotion of unverified returns. The Paper also formalises second-opinion services. Advisers often give informal second opinions on products distributed by others. SEBI would let advisers charge for those services within capped arrangements and with clear disclosure. The Paper references a 2.5 percent ceiling as a guardrail. It also proposes annual consent for ongoing fee arrangements so clients stay informed about layered charges. On corporatization, SEBI proposes a longer transition window and limited client onboarding during conversion. The current short period often forces advisers to pause or alter services. Extending the window, while requiring continued professional-liability cover and client notice, aims to smooth the process without reducing accountability. Additionally, the Paper aims to prune redundant documentary checks. Repeated proofs of address, multiple credit reports and duplicate tax submissions add time and cost without improving oversight. SEBI suggests replacing many routine checks with digital verification, sworn declarations and targeted spot checks. That approach redirects supervisory effort toward risks that matter for investors. Taken together, these measures show SEBI trying to reduce admin friction while keeping guardrails. Certification, templates and sunset clauses serve as those guardrails. The outcome depends on how precise and operable the implementing rules become. 2.Implementation challenges and standardisation requirements The reforms will succeed only if SEBI provides clear technical guidance and reasonable timelines, beginning with standardisation, since past-performance disclosures help clients only when advisers calculate and report returns uniformly.. SEBI should mandate a template that shows one-, three- and five-year gross returns, the corresponding net returns after fees, the benchmark used for each period, start and end dates, and a short note on the calculation method. The template should explain how to treat cash flows and whether to use time-weighted or money-weighted returns. It should also describe how to present multi-asset strategies. Without that clarity, numbers will be hard to compare and easy to manipulate. Verification should remain proportionate, and while chartered-accountant certification provides a strong safeguard, its costs weigh most heavily on small advisers. . SEBI should provide tiered options wherein larger firms can use full certification, mid-sized firms can rely on accredited third-party verifiers or audited internal reports and the small advisers can face random audits or accept higher liability if they self-certify. These alternatives keep oversight while avoiding a one-size-fits-all burden. Record-keeping and consent require fundamental digital systems. To track consent renewals, provide client-specific performance, and maintain auditable records, advisers will require secure solutions. SEBI ought to establish minimal technical requirements and permit gradual adherence. In order to prevent smaller firms from falling behind, the regulator can also promote open-source toolkits and low-cost vendors. Supervisory inspections will be sped up and conflicts will be decreased with the explicit guidelines on encryption, retention periods, and access limits. Digital verification can reduce documentation without compromising oversight. By connecting checks to trustworthy databases like PAN and verified tax records, SEBI can implement a verify-once paradigm. This lessens the need for duplicate checks, but it also necessitates privacy protections, backup plans in case of system failures, and a clear understanding of who is responsible for automated checks that go wrong. Efficiency and safety would be balanced by a hybrid architecture that automates regular inspections and saves manual review for outliers. The chartered-accountant requirement raises timing and cost questions such as who bears the charge and when must certification occur? SEBI could allow phased certification, for example a short self-certification period followed by formal attestation within a defined window, or it could permit accredited data providers to give standard attestations. Both options would maintain verification while easing the burden on small firms. Surveillance and enforcement must match a lighter prescriptive approach. A disclosure-led model needs better detection tools such as sample audits, anomaly detection and proportionate penalties that deter misuse. SEBI should build risk-scoring systems that flag outliers and support those systems with periodic manual checks. Targeted enforcement will keep the regime credible without reverting to blanket paperwork requirements. Finally, continuing competence matters. NISM exams can remain the baseline, but advisers should complete modest annual training and face occasional competency checks. Regular education and random assessments will keep standards current and reduce the risk of persistent low-quality advice. These measures, precise templates, tiered verification,