SEBI Proposes Major Overhaul of 'Fit and Proper' Framework for Market Intermediaries

• SEBI has proposed a comprehensive overhaul of the 'fit and proper person' framework governing market intermediaries to enhance procedural clarity and fairness.
• Key amendments include codifying the right to a hearing, refining disqualifying events, and reducing regulatory uncertainty.
• The regulator plans to abolish winding-up proceedings as an automatic disqualification, requiring only a final winding-up order.
• A new clause mandates intermediaries to inform SEBI within seven days of any disqualifying event and ensures a hearing opportunity before declaring someone 'not fit and proper'.
• Other changes include removing the default five-year ineligibility period, reducing SCN-related application hold times, and restricting voting rights instead of mandatory share divestment for disqualified persons in control.