SEBI Proposes New Rules for RTAs, Separate Units for Listed and Unlisted Services

SEBI has proposed comprehensive regulatory reforms for Registrar and Transfer Agents, introducing activity-based regulation whereby services to listed companies remain under SEBI oversight, whilst unlisted firm services transfer to the Ministry of Corporate Affairs supervision. The proposals seek public consultation until August 28, 2025, representing a significant modernisation of the RTA regulatory framework.

Separate Business Units Required for Listed-Unlisted Services

RTAs serving both listed and unlisted entities must establish Separate Business Units exclusively for unlisted services within 18 months of implementation. Complete operational separation between listed and unlisted businesses is mandatory, whilst SEBI continues granting registrations. MCA will oversee unlisted company services and handle related investor complaints, creating a clear regulatory demarcation.

Single RTA Category with ₹50 Lakh Uniform Net Worth

SEBI proposes merging the existing Registrar to an Issue and Share Transfer Agent categories into a single 'Registrar & Transfer Agent' category with an updated definition. Uniform ₹50 lakh net worth requirement applies to all RTAs, replacing the current dual-category system where Category I performs both functions whilst Category II handles either, deemed outdated given the physical share transfer phase-out.

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Comprehensive Fraud Prevention System Implementation

New fraud prevention measures include CEO/MD accountability, audit committee oversight, surveillance systems for fraud detection, whistleblower policy with complainant protection, and KYC-based investor identity monitoring. Currently, RTAs lack formal fraud detection systems despite physical shareholding fraud risks, making these measures crucial for investor protection enhancement.

35,000 Unlisted vs 4,000 Listed Company Services

SEBI-registered RTAs currently serve approximately 35,000 unlisted companies compared to 4,000 listed entities. The activity-based regulation addresses SEBI's limited jurisdiction over unlisted securities whilst ensuring appropriate oversight. Net worth calculation changes include securities premium alignment with the Companies Act 2013, expanding beyond the current free reserves consideration.

Conclusion

SEBI's activity-based RTA regulation proposal with separate business units, single category merger, and ₹50 lakh net worth requirement modernises regulatory oversight for 35,000 unlisted and 4,000 listed company services. The comprehensive framework, including fraud prevention systems and MCA oversight for unlisted services, ensures appropriate regulation whilst supporting India's securities market digitalisation through streamlined RTA operations until August 28, 2025, consultation deadline.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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