Published on 26th July 2025
Authored By: Chintapalli Leela Madhuri
Gitam university
Abstract
The 2023–2024 amendments to the Securities and Exchange Board of India (SEBI) Act represent a significant shift in India’s regulatory landscape, aiming to enhance market transparency, investor protection, and enforcement capacity. This paper analyzes the impact of these reforms on listed companies, market intermediaries, investors, and regulators. It also discusses key enforcement case studies, market reactions, implementation challenges, and proposes recommendations for refining the regulatory framework. While these amendments improve oversight and confidence in India’s capital markets, they also present operational and legal challenges that require strategic navigation and stakeholder collaboration.
Introduction
The Securities and Exchange Board of India (SEBI) is the key regulating expert for the Indian securities market. The regulatory body was established under the SEBI Act of 1992[1] And is responsible for protecting investor interests, maintaining fair market practices, and promoting capital market development. SEBI’s regulatory structure has evolved gradually to handle emerging market issues, systemic risks, and corporate governance difficulties. The recent amendments to the SEBI Act (2023-2024) indicate an important change in India’s securities regulation structure. These reforms emerged from increased concerns about market manipulation, corporate fraud, a lack of transparency procedures, and the need for more regulatory power. Furthermore, notable advances in financial technology, increased retail investor participation, and global investment in capital markets have raised the need for regulatory improvements.
Legal Framework and Comparative Analysis
Evolution of Securities Regulation in India:
Since the early 1990s, India’s securities market has undergone significant regulatory reforms. Before the formation of the Securities and Exchange Board of India (SEBI) in 1988 (statutorily empowered in 1992), the securities market was generally managed by the Capital Issues (Control) Act of 1947[2], which gave the government direct control over capital issuance. However, the liberalization of India’s economy in the 1990s showed the importance of an independent and transparent regulatory agency to oversee market operations.
Significant developments in India’s security regulatory structure include[3]:
- The SEBI Act of 1992 established SEBI as the statutory regulator for capital markets, with administrative and legislative powers.
- The Depositories Act of 1996 introduced electronic book-entry securities instead of physical share certificates, increasing efficiency and reducing fraud.
- The Securities Laws (Amendment) Act of 2014 improved SEBI’s investigative and enforcement powers by allowing for the takeover of assets and recovery of penalties.
- Recent Amendments (2023-2024): Increased regulatory monitoring, better transparency norms, digital compliance procedures, and investor protection measures.
These developments have established SEBI as an active regulator, balancing market expansion with strict governance and enforcement measures. However, with the rise of complex financial instruments, a growing global network, and technological advances, there is a constant need for amendments to securities law.
Comparison with Global Regulatory Frameworks
To ensure efficiency and investor confidence, India’s regulatory framework is often compared to global standards, particularly those of the United States Securities and Exchange Commission (SEC)[4]The United Kingdom’s Financial Conduct Authority (FCA)[5], and the European Securities and Markets Authority (ESMA)[6].
Key areas of comparison include:
- Regulatory Structure & Powers:
While SEBI mostly imposes civil and administrative penalties, the SEC (U.S.) has larger enforcement authority, including the capacity to impose criminal penalties. While SEBI follows a more rule-based structure, the UK FCA uses a principles-based regulatory approach that allows flexibility in enforcement.
- Transparency and Compliance:
Under the law known as Sarbanes-Oxley[7], the U.S. SEC faces some of the strictest reporting standards, demanding an extreme level of transparency. Recent changes from SEBI have enhanced technologically based compliance, mandated transparency, and corporate governance standards.
- Investor Protection Mechanisms:
Strong investor protection through clearly established dispute resolution procedures is highlighted by the European regulatory model (ESMA). Despite adopting similar reforms, SEBI continues to experience difficulties in guaranteeing efficient enforcement and dispute resolution.
- Market Surveillance & Technology Integration:
SEBI has implemented AI-driven monitoring and regulatory testing systems to align with global fintech regulatory trends. However, India’s capacity for immediate enforcement and collaboration with worldwide regulators requires improvement.
While SEBI has significantly expanded securities regulation in India, the comparison reveals areas for further growth. By adopting best practices from global regulatory frameworks, India can enhance its approach to investor protection, market surveillance, and enforcement efficiency, resulting in a stronger and more transparent capital market sector.
Key Amendments to the SEBI Act (2023–2024)
The Securities and Exchange Board of India (SEBI) has made significant changes to its regulatory framework in 2023-2024 to improve market monitoring, transparency, and investor protection[8]. These changes seek to address rising risks in capital markets, enhance corporate governance, and strengthen enforcement measures.
- Strengthened Regulatory Oversight:
The SEBI (Alternative Investment Funds) (Amendment) Regulations, 2023, update the SEBI (AIF) Regulations, 2012, to enhance the monitoring of investment structures. The amendment required better disclosures about downstream investments, compelled unit dematerialization for large AIFs, and expanded SEBI’s authority to obtain information from AIFs and their management. These changes enhance fund monitoring and align it with international standards. The amendments include increased surveillance mechanisms based on AI-driven systems, expanded authority for on-site inspections and investigations of listed companies, intermediaries, and mutual funds, and new guidelines for Market Infrastructure Institutions (MIIs)[9] To enhance regulations for stock exchanges, clearing corporations, and depositories to prevent systemic risks.
- Enhanced Disclosure and Compliance Requirements:
The SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2023 substituted Regulation 34(2)(f) from the SEBI (LODR) Regulations, 2015[10] to adopt the BRSR Core structure. This requires the top 150 listed firms to provide detailed Business Responsibility and Sustainability Reports beginning with their financial year 2023-24. The goal is to increase ESG transparency and ethical business conduct. SEBI increased disclosure requirements to improve business openness and investor confidence. Large public companies are now expected to issue sustainability reports per global best practices. Companies seeking public listing must give detailed financial disclosures, risk evaluations, and promoter background checks[11]. Listed firms must additionally disclose significant financial events that may influence investor decisions.
- Stricter Enforcement and Penalties:
The SEBI (Intermediaries) (Amendment) Regulations, 2023, and the SEBI (Settlement Proceedings) (Amendment) Regulations, 2023, make amendments to the SEBI (Intermediaries) Regulations, 2008, and the SEBI (Settlement Proceedings) Regulations, 2018. These reforms expanded the basis for action against market intermediaries and enabled SEBI to quicken enforcement through structured settlement processes. Furthermore, Section 15 of the SEBI Act of 1992 was changed by the Finance Act of 2023, increasing penalty limitations for offenses such as insider trading and fraudulent trade practices in order to increase deterrence and responsibility. SEBI has increased penalties and streamlined its enforcement process to prevent violations, including increased monetary fines for insider trading, misrepresentation, and non-compliance, a quicker dispute resolution mechanism, and strengthened whistleblower protections to reduce regulatory action delays while increasing employees’ protections.
- Investor Protection Measures:
The SEBI (Investor Protection and Education Fund) (Amendment) Regulations, 2023 amended the SEBI (IPEF) Regulations, 2009 to expand the usage of the Investor Protection Fund to compensate investors in circumstances of inactive brokers or systemic frauds. SEBI has increased its commitment to investor interests through several initiatives, including updated Grievance Redressal Mechanisms (SCORES)[12], stricter Mutual Fund Regulations, and novel methods to combat fraud in Algo Trading and Fintech. These rules attempt to increase transparency in risk levels, asset allocation adjustments, and fund manager track records while also protecting retail investors from liquidity issues.
Impact on Market Participants and Regulators
- Implications for Companies and Market Intermediaries:
The listed companies, intermediaries, financial advisors, mutual funds, and market infrastructure institutions (MIIs) are liable for stricter legal responsibilities under the recent amendments. They additionally enhanced corporate governance regulations, increasing the liability of market intermediaries such as brokers and investment advisors. Increased disclosure standards could also influence IPOs and fundraising, as longer approval instances could affect companies’ capital-raising methods.
- Changes in SEBI’s Enforcement Powers:
SEBI has increased its regulatory authority, enabling rapid enforcement against noncompliance[13]. Key changes include increased search and seizure authority, faster adjudication and penalties for offenses such as insider trading, price manipulation, and corporate fraud, increased surveillance measures based on AI-driven analytics and continuous surveillance tools, and improved cross-border regulatory coordination with global regulatory bodies to track offshore fraud and foreign investor activity. These improvements are intended to prevent manipulation and ensure compliance with rules.
- Effects on Investors and Market Dynamics:
SEBI’s regulatory amendments aim to enhance transparency and investor confidence, expedite the resolution of investor complaints, and regulate electronic trading and fintech. These policies are intended to protect regular investors against predatory rapid trading and digital trading risks. However, more regulation may cause short-term shifts in stock prices and liquidity, resulting in market instability. These developments are likely to have both positive and negative consequences for investors and overall market stability[14].
Case Studies: Legal Enforcement Under the New Provisions
- Ketan Parekh v. Securities and Exchange Board of India[15]:
In January 2025, SEBI charged former broker Ketan Parekh and 21 associates with conducting deals involving a foreign business. The inquiry found illegal earnings of ₹657.7 million. SEBI imposed unlimited trading prohibitions and ordered the funds’ recovery, confirming stronger enforcement powers.
- Eros International Media Ltd. vs Sebi[16]:
On June 28, 2024, the SAT heard the case concerning fund diversion and irregularities involving EIML and related entities. SEBI investigated financial mismanagement and transactions with members. Though EIML challenged the findings, the case confirmed SEBI’s analysis of corporate governance.
- IIFL Securities Ltd. vs Sebi[17]:
On December 7, 2023, the SAT ruled on SEBI’s sanction against IIFL for mishandling client funds. Although SEBI’s monetary penalty was reduced from ₹1 crore to ₹20 lakh, the ban on onboarding new clients was upheld. This highlights SEBI’s assurance of market integrity.
Market Reaction and Stakeholder Responses
While investors desired transparency, companies raised concerns about rising legal expenses and operational challenges. Delays in IPO approvals due to disclosure requirements are a major concern. Institutional investors prefer stronger governance, but are concerned about overregulation of innovation. Retail investors are confident due to fraud prevention actions, but markets may see short-term swings.
Challenges and Implementation Issues
- Compliance and Enforcement Challenges:
The new amendments to SEBI’s regulations increase the compliance burden on companies and intermediaries by mandating extensive disclosures, stronger governance standards, and immediate reporting. Startups and smaller companies struggle to achieve these standards without significant legal and regulatory knowledge. Enforcement delays and obstacles can reduce the effectiveness of regulatory action. Joint coordination is required to streamline enforcement actions. Furthermore, technology-driven market manipulation techniques, such as high-frequency trading loopholes and digital asset fraud, present threats that involve ongoing technological advancements.
- Legal and Regulatory Gaps:
The Securities and Exchange Board of India (SEBI) has recently introduced laws governing digital securities, ESG reporting, and alternative investment funds, but their interpretation and execution remain unclear. Companies want more specific guidelines to ensure compliance. The penalty framework differs by offense category, and a more consistent method is required for fairness. A powerful whistleblower protection scheme, similar to the Whistleblower Program of the United States Securities and Exchange Commission, is needed. Global regulatory problems for international investors could discourage investment.
Recommendations for Further Refinement
- Provide stronger regulatory guidance and standard compliance frameworks.
- Implement uniform penalty structures for fairness.
- Enhance coordination between SEBI, RBI, and financial regulators.
- Strengthen whistleblower protections.
- Align laws with global best practices to attract foreign investment.
Conclusion
The 2023–2024 SEBI Act amendments mark a significant step toward strengthening market integrity, investor protection, and regulatory enforcement. By enhancing disclosures, penalties, and SEBI’s powers, these reforms aim to build a more transparent and accountable financial system. However, they also bring legal issues that require careful implementation. To maximize their effectiveness, SEBI must address regulatory gaps, ensure fair enforcement, and foster collaboration. A proactive approach will help sustain market growth, protect investors, and maintain India’s global competitiveness.
References
[1] Aishwarya Agrawal, Evolution of Securities and Investment Laws in India, LawBhoomi, September 23, 2023, https://lawbhoomi.com/evolution-of-securities-and-investment-laws-in-india/ accessed on 01 March 2025
[2] A Historical Perspective of the Securities Market Reforms in India, Securities and Exchange Board of India (SEBI), https://www.sebi.gov.in/sebi_data/docfiles/2975_t.html accessed on 01 March 2025
[3] G.N. Bajpai, Development of the Securities Market in India, International Monetary Fund, https://www.elibrary.imf.org/downloadpdf/book/9781589065192/ch004.xml accessed on 01 March 2025
[4] The Role of the SEC, U.S. Securities and Exchange Commission, https://www.investor.gov/introduction-investing/investing-basics/role-sec accessed on 01 March 2025
[5] Financial Conduct Authority (FCA), IAS Plus, https://www.iasplus.com/en-gb/resources/other-regulatory/market-rules/financial-conduct-authority-fca accessed on 01 March 2025
[6] The European Securities and Markets Authority (ESMA), European Union, https://european-union.europa.eu/institutions-law-budget/institutions-and-bodies/search-all-eu-institutions-and-bodies/european-securities-and-markets-authority-esma_en accessed on 01 March 2025
[7] The Sarbanes-Oxley Act, https://sarbanes-oxley-act.com/ accessed on 01 March 2025
[8] Key Amendments to SEBI (LODR) Regulations | Enhancing Corporate Governance and Transparency, Taxmann, December 20, 2024, https://www.taxmann.com/post/blog/analysis-key-amendments-to-sebi-lodr-regulations accessed on 01 March 2025
[9] SEBI’s New Directives for Market Infrastructure Institutions (MIIs), Angel One, December 4, 2024, https://www.angelone.in/news/sebis-new-directives-for-miis accessed on 01 March 2025
[10] Shardul Amarchand Mangaldas & Co., “SEBI (LODR) Regulations Amended: Top 1000 Listed Entities to Include BRR in Annual Report” (Dec. 26, 2019), https://www.amsshardul.com/insight/sebi-lodr-regs-amended-top-1000-listed-entities-to-include-brr-in-annual-report/
[11] Overview of SEBI LODR and Recent Amendments, LinkedIn, https://www.linkedin.com/pulse/overview-sebi-lodr-recent-amendments-complinity-compliance-software-wo7uc/ accessed on 01 March 2025
[12] SCORES 2.0 New Technology to Strengthen SEBI Complaint Redressal System for Investors, Securities and Exchange Board of India (SEBI), https://www.sebi.gov.in/media-and-notifications/press-releases/apr-2024/scores-2-0-new-technology-to-strengthen-sebi-complaint-redressal-system-for-investors_82618.html accessed on 01 March 2025
[13] SEBI’s Revolutionary Ideas to Restructure the Stock Market, Bajaj Broking, October 5, 2024, https://www.bajajbroking.in/blog/will-india-become-leader-in-semiconductor-chips#:~:text=Impact%20on%20Market%20Participants,Enhanced%20Safety accessed on 01 March 2025
[14] ibid
[15] India Markets Regulator Alleges Front Running by Former Stockbroker Ketan Parekh, Reuters, January 2, 2025, https://www.reuters.com/world/india/india-markets-regulator-alleges-front-running-by-former-stockbroker-ketan-parekh-2025-01-02/?utm_source=chatgpt.com accessed on 01 March 2025
[16] Eros International Media Ltd. v. SEBI, Indian Kanoon, June 28, 2024, https://indiankanoon.org/doc/53497457/ accessed on 01 March 2025
[17] IIFL Securities Ltd. v. SEBI, Indian Kanoon, December 7, 2023, https://indiankanoon.org/doc/31620623/ accessed on 01 March 2025
