SEBI Approves New Broker, Mutual Fund and IPO Rules in December 2025

Yesterday the Securities and Exchange Board of India (SEBI) approved a comprehensive set of regulatory changes affecting stock brokers, mutual funds, and selected IPO processes. These reforms replace long-standing frameworks that had become complex over time and aim to align regulation with how Indian markets function today.

For active traders and brokers, the importance of this overhaul lies in simpler compliance, clearer supervision, and lower structural costs, rather than any immediate change in trading rules.

Overview of SEBI’s December 2025 Regulatory Changes

The key measures approved by SEBI include:

• New Stock Brokers Regulations
• New Mutual Funds Regulations
• Targeted amendments to IPO

Together, these changes focus on reducing regulatory bulk, improving readability, and applying risk-based supervision instead of uniform compliance.

Mutual Funds Regulations, 2026: Lower Costs and Clearer Rules

SEBI also approved the Mutual Funds Regulations, 2026, replacing the 1996 framework. The revised regulations are significantly shorter and easier to understand, while retaining core investor safeguards.

Revised Expense Ratio Limits

Key changes include:

• Exclusion of statutory levies such as STT(Securities Transaction Tax), GST, and stamp duty from TER(Total Expense Ratio)
• Reduction in TER caps:

• Equity schemes: reduced from 1.25% to 1.00%
• Other schemes: reduced from 1.00% to 0.80%

This change improves cost transparency and makes it easier for investors to compare mutual fund expenses across schemes on a like-for-like basis.

Brokerage Caps in Mutual Funds

Brokerage fee limits have been revised as follows:

• Cash market transactions: reduced from 8.59 basis points to 6 basis points
• Derivatives transactions: reduced from 3.89 basis points to 2 basis points

The revised caps align brokerage costs more closely with current market practices and support more cost-efficient execution and distribution.

Clearer AMC and Trustee Responsibilities

The new regulations define the roles of Asset Management Companies (AMCs) and trustees more clearly, reducing ambiguity in areas such as valuation, disclosures, and risk management.

IPO Rule Changes Approved by SEBI

SEBI did not announce a complete overhaul of IPO regulations but approved targeted amendments to simplify processes and improve disclosures.

Automated Lock-In for Pledged Shares

Pledged shares will now be automatically locked in by depositories, including the six-month lock-in for non-promoter holdings. This removes the need for manual compliance by issuers.

Offer Document Summary at DRHP Stage

SEBI has introduced a standardised offer document summary, available from the DRHP stage. This summary highlights:

• Key risks
• Financial information
• Offer structure

The aim is to make IPO disclosures easier to navigate for investors.

Anchor Investor Lock-In Rules

Earlier extensions to anchor investor lock-ins, including partial 90-day lock-ins, continue to apply and are intended to reduce post-listing volatility.

Stock Brokers Regulations, 2025 Explained

The Stock Brokers Regulations, 2025 replace the 1992 rules, which were framed for an era of physical settlement and limited product complexity. The new framework is organised into clearly defined chapters covering registration, obligations, and supervision.

Risk-Based Supervision and “Qualified Broker” Criteria

Under the new regulations, SEBI introduces a Qualified Broker concept, where oversight depends on:

• Size of the active client base
• Trading volumes
• Operational scale

Larger brokers will face closer supervision, while smaller brokers will be regulated proportionately. This reduces unnecessary compliance pressure on low-risk intermediaries.

Exchanges as First-Line Regulators

Another important change is the expanded role of stock exchanges:

• Brokers will report compliance, financial statements, and record details directly to exchanges
• SEBI will focus on policy formulation and enforcement

This shift reduces duplication and improves the efficiency of regulatory supervision.

Client Fund Handling Rules

The new broker regulations also tighten rules on client funds:

• Client balances cannot be used for bank guarantees
• Clear credit balances must be transferred daily to clearing corporations
• Interim parking is restricted to approved low-risk instruments

These measures strengthen fund segregation and reduce operational risk during volatile market conditions.

What This Means for Traders and Brokers

Taken together, SEBI’s December 2025 regulatory overhaul signals:

• Simpler and more readable regulations
• Supervision focused on risk rather than size alone
• Improved cost transparency across market segments

For traders and brokers, the impact will be gradual, reflected in cleaner compliance processes, clearer disclosures, and reduced structural costs.

SEBI’s December 2025 reforms are not designed to disrupt daily market activity. Instead, they aim to ensure that regulation evolves alongside market practices.

If implemented effectively, these changes should make participation in Indian capital markets more efficient, predictable, and transparent while continuing to protect investor interests.