Description

SEBI clarifications on client categorization and proprietary trading criteria for CSCRF compliance by research analysts and trading members.

Summary

SEBI has issued clarifications regarding the implementation of the Cybersecurity and Cyber Resilience Framework (CSCRF) for regulated entities, specifically addressing how to determine the number of registered clients and the categorization of trading members engaged in both clientele and proprietary trading.

Key Points

  • Registered clients count should be based on Unique PAN including both active and inactive status
  • Closed clients in UCC database should be excluded from the count
  • Trading members with clientele turnover less than 10% of proprietary turnover will be categorized as proprietary stockbrokers
  • Clarifications build upon previous SEBI circulars and FAQs dated August 2024 through August 2025

Regulatory Changes

The circular clarifies two key aspects of CSCRF implementation:

  1. Client Counting Methodology: Number of registered clients should include clients with active and inactive status based on Unique PAN, explicitly excluding clients marked as “Closed” in the UCC database.

  2. Proprietary Trading Classification: Trading members/REs engaged in both clientele and proprietary trading will be considered proprietary stockbrokers if their clientele trading turnover is less than 10% of proprietary trading turnover during the financial year (April 1 to March 31).

Compliance Requirements

  • Research Analysts (RAs) must take note of these clarifications and ensure compliance
  • Trading members must correctly categorize themselves based on the 10% turnover threshold
  • Entities must apply the correct client counting methodology when determining CSCRF applicability
  • All affected entities should review their current categorization and make necessary adjustments

Important Dates

  • Notice Date: September 2, 2025
  • Financial Year Period for Assessment: April 1 to March 31
  • References previous circulars dated: August 20, 2024; December 31, 2024; March 28, 2025; April 30, 2025; June 11, 2025; August 28, 2025

Impact Assessment

These clarifications will impact how trading members and research analysts determine their categorization under CSCRF, potentially affecting their compliance obligations. The 10% threshold for proprietary trading classification may allow some entities to be subject to different compliance requirements based on their business mix. The clarified client counting methodology ensures consistent application across the industry.

Impact Justification

Important clarifications for CSCRF implementation affecting categorization of trading members and client counting methodology