SEBI Announces Procedure for Rule Amendments, Requires Public Consultation

To enhance transparency in regulatory decision-making, the Securities and Exchange Board of India (SEBI) has introduced a structured procedure for formulating, amending, and reviewing regulations. This new framework mandates public consultation and stakeholder engagement before modifying existing norms, ensuring that regulatory changes are well-informed and inclusive.

As per a gazette notification, the market watchdog has officially implemented the SEBI (Procedure for Making, Amending, and Reviewing of Regulations) Regulations, 2025. The initiative aims to foster a participatory approach, allowing market participants, investors, and other stakeholders to voice their opinions before any regulatory amendments are finalized.

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Process for Making Regulations

Under the newly specified process, SEBI will publish proposed regulatory changes on its official website. This publication will include:

• Proposed Modifications: Details of the suggested changes in the regulatory framework.
• Regulatory Intent and Objectives: A statement explaining the purpose and goals of the proposed amendments.
• Public Consultation Details: Information on the process, timeline, and format for submitting feedback.

To ensure adequate time for stakeholder engagement, SEBI has set a standard minimum period of 21 calendar days for receiving public comments on any proposed regulations.

Consideration of Public Feedback

Once the public consultation phase concludes, SEBI will systematically review all submitted comments. The regulator will then publish a rationale for rejecting any suggestions, ensuring a transparent decision-making process.

Following this, the proposed regulations and an accompanying agenda paper will be presented for consideration by SEBI. If a public consultation has been conducted, the agenda paper will include:

• A structured compilation or summary of public comments received.
• SEBI’s remarks and observations on the feedback.

This process ensures that the perspectives of various stakeholders are duly considered before finalizing any regulatory changes.

Exemptions from Public Consultation

While the public consultation process is a fundamental part of the regulatory framework, SEBI has allowed for certain exemptions. If the SEBI Board determines that conducting a public consultation could defeat the purpose of a proposed regulation, the chairperson has the authority to:

Waive the requirement for public consultation entirely, or reduce the public comment period, allowing for faster implementation of critical regulations.

This provision ensures flexibility in cases where urgent regulatory action is required for investor protection or market stability.

SEBI's new framework marks a significant step towards enhancing transparency and stakeholder participation in regulatory decision-making. By mandating public consultations and systematically addressing feedback, the regulator aims to create a more inclusive and efficient rule-making process. However, the provision for exemptions also allows for timely interventions when necessary. This balanced approach is expected to improve trust and confidence in India's securities market.