Securities and Exchange Board of India (SEBI) vide circular dated 8th December, 2025, introduced regulatory changes which aimed at enhancing the ease of doing business for Alternative Investment Funds (AIFs). These changes include the introduction of two new categories of AIF schemes: AI-only schemes (limited exclusively to Accredited Investors) and Large Value Funds (LVFs) for Accredited Investors. These schemes will benefit from reduced compliance requirements, especially in terms of investor protection. AIFs that wish to launch these schemes must include “AI only fund” or “LVF” in the scheme name.

Existing AIF schemes can migrate to AI-only or LVF status, but they must obtain consent from all investors. Upon conversion, the scheme’s name must reflect its new classification, and SEBI must be notified within 15 days of the change. Moreover, the conversion ensures that an investor’s accredited investor status is maintained throughout the life of the scheme, even if they lose such status during the term.

The circular also provides several relaxations for LVFs, such as exemption from the standard placement memorandum and audit requirements, without the need for specific waivers from investors. Additionally, the circular includes an update to the compliance framework, requiring trustees and sponsors to ensure that the “Compliance Test Report” includes verification of adherence to these new provisions.

These changes, which are effective immediately, aim to provide greater operational flexibility and promote the development of AIFs in India.

On 12th December, 2025, outlining provisions to strengthen the governance of Market Infrastructure Institutions (MIIs) such as Stock Exchanges, Clearing Corporations, and Depositories. These institutions have gained increasing significance in the securities market due to their growth, adoption of technology, and broader market participation. SEBI’s amendments to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and the Depositories and Participants Regulations, 2018, aim to improve the governance and accountability of these MIIs.

Key provisions in the circular focus on enhancing the roles of Executive Directors (EDs) and introducing new governance structures. The EDs of two critical verticals—(1) Critical Operations and (2) Regulatory, Compliance, Risk Management, and Investor Grievances—will now be required to be members of the MII’s Governing Board. The appointment of EDs will be done through an open advertisement, and two candidates will need to be forwarded to SEBI for approval. EDs will report to the Managing Director (MD), and their performance will be assessed independently by the relevant committees. Additionally, the Chief Technology Officer (CTO), Chief Information Security Officer (CISO), and other key management personnel (KMPs) will report directly to their respective EDs.

Further, the circular introduces specific provisions related to the Chief Risk Officer (CRiO), who will handle technology audits, including System and Cyber Security Audits, and attend the Standing Committee on Technology (SCOT) meetings. The governance structure will be phased in, with the first Executive Director being appointed within six months, and the second within nine months of the regulation’s implementation. These provisions aim to ensure better governance and accountability in MIIs, thereby enhancing investor protection and market stability.

SEBI has issued a circular dated December 18, 2025, modifying the conditions for reduction in denomination of debt securities and non-convertible redeemable preference shares issued on a private placement basis. This circular amends Chapter V of the NCS Master Circular dated October 15, 2025, which had earlier permitted issuance at a reduced face value of ₹10,000, subject to specified conditions.

Under the earlier framework, reduced denomination was allowed only for interest or dividend bearing securities with regular periodic payouts and fixed maturity, thereby excluding zero-coupon debt securities. Market participants highlighted that zero-coupon instruments, though not carrying periodic interest, are typically issued at a discount and redeemed at par, generating compounded returns for investors and offering portfolio diversification benefits.

Taking this into account, SEBI has partially modified Clause 1.3 of Chapter V of the NCS (Non-Convertible Securities) Master Circular to explicitly permit zero-coupon debt securities with fixed maturity and without structured obligations to be issued at a reduced face value of ₹10,000. Accordingly, issuers may now issue debt securities at the reduced denomination whether they are interest-bearing or zero-coupon, provided all other prescribed conditions are met.

The Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2025, notified on 3rd December 2025, introduced a comprehensive revamp of the regulatory framework governing merchant bankers in India. The amendments, aims to strengthen prudential norms, enhance governance standards, and rationalize permitted activities to align the merchant banking ecosystem with evolving market realities and investor protection objectives.

A key structural change under the amendments is the re-categorization of merchant bankers into Category I and Category II. Category I merchant bankers are permitted to undertake all activities, while Category II merchant bankers are restricted from managing public issues of equity shares listed on the main board. Existing registered merchant bankers are required to re-categories themselves within timelines and in a manner to be specified by SEBI

The amendments significantly enhance financial soundness requirements by revising capital adequacy norms and introducing a new concept of liquid net worth. The minimum net worth has been prescribed at ₹50 crore for Category I and ₹10 crore for Category II merchant bankers. In addition, liquid net worth thresholds of ₹12.5 crore and ₹2.5 crore respectively have been introduced, to be maintained at all times. Merchant bankers failing to meet these requirements are barred from undertaking fresh permitted activities until compliance is achieved.

Governance and operational controls have also been tightened. The definition and role of the principal officer have been strengthened, minimum experience and responsibility thresholds have been clarified, and certification requirements have been introduced for key employees and compliance officers. Further, merchant bankers are prohibited from outsourcing core activities such as due diligence and preparation of offer documents. New conflict-of-interest restrictions prevent merchant bankers from managing their own issues or issues where key managerial personnel or their relatives have significant shareholding, subject to limited exceptions.

Finally, the amendments rationalize and expand the list of permitted activities, introduce a requirement for minimum revenue generation from core merchant banking activities (with specific carve-outs), and mandate segregation and ring-fencing of non-SEBI-regulated or other financial sector activities through separate business units. Enhanced compliance obligations relating to record preservation, data localization within India, underwriting exposure limits linked to liquid net worth, and a strengthened compliance officer framework underscore SEBI’s intent to promote resilience, accountability, and professionalism in the merchant banking industry

SEBI has issued a Consultation Paper dated December 4, 2025, proposing a review of the existing position limits applicable to Trading Members (TMs) in the Equity Derivatives Segment, particularly for index options. The objective is to align the TM-level position limit framework with the revised client-level limits introduced through SEBI’s circular dated May 29, 2025, which shifted position monitoring from notional contract value to a Future Equivalent (FutEq) / delta-adjusted metric. Currently, while client limits are monitored on a FutEq basis, TM limits continue to be monitored on a notional basis, resulting in metric misalignment.

SEBI notes that FutEq-based limits provide a more accurate measure of risk for options positions and allow aggregation of options and futures open interest (OI). Further, concerns have been raised that the existing absolute TM limit of ₹7,500 crore could allow a single TM to hold a disproportionately large share of OI in indices with relatively low market-wide activity, potentially impacting market integrity. Accordingly, SEBI proposes strengthening the framework by introducing a slab-based absolute limit structure linked to market-wide FutEq OI.

Under the draft circular, no change is proposed for index futures, as futures positions already align with FutEq measurement due to delta being one. For index options, TM limits would be computed as the higher of (i) 15% of market-wide FutEq OI and (ii) an absolute FutEq-based limit determined through a slab structure ranging from ₹2,000 crore to ₹12,000 crore, depending on the average daily FutEq OI of the index in the current quarter. This approach is intended to balance flexibility for position creation with safeguards against concentration risk.

The draft also outlines enhanced monitoring mechanisms, including daily dissemination of market-wide FutEq OI by stock exchanges and provision of option deltas by clearing corporations to enable intraday computation by TMs.