Description

SEBI clarifications on determining registered clients and categorization of proprietary trading members under the CSCRF guidelines.

Summary

SEBI has issued clarifications regarding the implementation of the Cybersecurity and Cyber Resilience Framework (CSCRF) for regulated entities. The clarifications address two key areas: the methodology for determining the total number of registered clients and the categorization criteria for trading members engaged in both proprietary and client trading activities.

Key Points

  • Registered clients count must 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 issued throughout 2024-2025

Regulatory Changes

The circular clarifies the interpretation of existing CSCRF guidelines rather than introducing new regulations. Specifically, it modifies how regulated entities should calculate their client base for categorization purposes and defines clear thresholds for proprietary versus clientele trading classification.

Compliance Requirements

  • Trading members must calculate registered clients based on Unique PAN, including active and inactive clients but excluding closed accounts
  • Entities engaged in both proprietary and client trading must assess if clientele trading is less than 10% of proprietary turnover
  • Investment advisors must implement these clarifications in their CSCRF compliance framework
  • All affected entities should review their current categorization and adjust if necessary

Important Dates

  • Original CSCRF circular: August 20, 2024
  • Latest clarification circular: September 2, 2025
  • Assessment period for trading turnover: April 1 to March 31 (annual)

Impact Assessment

These clarifications will primarily impact trading members and investment advisors in determining their regulatory categorization under CSCRF. Entities with mixed proprietary and client trading operations may find themselves reclassified as proprietary traders if client turnover is minimal, potentially affecting their compliance obligations. The clarification on client counting methodology ensures consistent application across the industry.

Impact Justification

Important regulatory clarifications affecting categorization and compliance requirements for trading members and investment advisors