Ministry of Finance Clarifies Rules 8(1)(f) and 8(3)(f) of SCRR, 1957 — Relief for Stock Brokers

In a welcome move for the broker community (BSE Brokers’ Forum and Association of National Exchanges Members of India (ANMI), the Government of India (Ministry of Finance), has notified the Securities Contracts (Regulation) Amendment Rules, 2025 on May 19, 2025. This amendment provides long-awaited clarity on the interpretation of Rules 8(1)(f) and 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957 (SCRR).

The amendment expressly clarifies that:

“𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘮𝘢𝘥𝘦 𝘣𝘺 𝘢 𝘮𝘦𝘮𝘣𝘦𝘳 𝘴𝘩𝘢𝘭𝘭, 𝘢𝘵 𝘢𝘭𝘭 𝘵𝘪𝘮𝘦𝘴, 𝘯𝘰𝘵 𝘣𝘦 𝘤𝘰𝘯𝘴𝘵𝘳𝘶𝘦𝘥 𝘢𝘴 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘦𝘹𝘤𝘦𝘱𝘵 𝘸𝘩𝘦𝘯 𝘴𝘶𝘤𝘩 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘪𝘯𝘷𝘰𝘭𝘷𝘦 𝘤𝘭𝘪𝘦𝘯𝘵 𝘧𝘶𝘯𝘥𝘴 𝘰𝘳 𝘤𝘭𝘪𝘦𝘯𝘵 𝘴𝘦𝘤𝘶𝘳𝘪𝘵𝘪𝘦𝘴, 𝘰𝘳 𝘳𝘦𝘭𝘢𝘵𝘦 𝘵𝘰 𝘢𝘳𝘳𝘢𝘯𝘨𝘦𝘮𝘦𝘯𝘵𝘴 𝘸𝘩𝘪𝘤𝘩 𝘢𝘳𝘦 𝘪𝘯 𝘵𝘩𝘦 𝘯𝘢𝘵𝘶𝘳𝘦 𝘰𝘧 𝘤𝘳𝘦𝘢𝘵𝘪𝘯𝘨 𝘢 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘭𝘪𝘢𝘣𝘪𝘭𝘪𝘵𝘺 𝘰𝘯 𝘵𝘩𝘦 𝘣𝘳𝘰𝘬𝘦𝘳.”

There were long standing demands from stakeholders and this amendment factors the established distinction (as provided in various cases by SAT and SEBI itself) between investment activity out of surplus funds (not from clients funds) and non-permissible business under the SCRR framework.

Earlier, Mr. Sumit Agrawal, Managing Partner and former SEBI Officer along with Mr. Kavish Garach, Senior Associate, had analysed the legal and regulatory complexities on this very issue in their article published on Taxmann Publications / SEBI and Corporate Laws Journal:
“𝘉𝘢𝘭𝘢𝘯𝘤𝘪𝘯𝘨 𝘈𝘤𝘵: 𝘗𝘳𝘰𝘱𝘰𝘴𝘦𝘥 𝘙𝘦𝘷𝘪𝘴𝘪𝘰𝘯𝘴 𝘵𝘰 8(1)(𝘧) / 8(3)(𝘧) 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘍𝘶𝘵𝘶𝘳𝘦 𝘰𝘧 𝘚𝘵𝘰𝘤𝘬 𝘉𝘳𝘰𝘬𝘦𝘳 𝘐𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴”, published by Taxmann Group.

https://lnkd.in/dtfDUjje

The article traced the evolving regulatory position under Rules 8(1)(f) and 8(3)(f), dissected SEBI’s circulars, and examined judicial precedents. The newly introduced clarification appears to reflect many of these deliberations.

While the amendment seeks to bring clarity, it also gives rise to fresh interpretational challenges particularly regarding the precise scope of the term ‘investment’. One of the most contentious and litigated issues that continues whether intra-group shareholding qualifies as an investment under the amended framework. The regulatory approach of SEBI, SAT, BSEIndia and NSE India will be crucial in determining how this ambiguity is ultimately resolved.

For any feedback or discussion, feel free to reach out to Regstreet Law Advisors at info@regstreetlaw.com

Regstreet Law Advisors Sumit Agrawal Kavish Garach