SEBI issued clarifications on Transfer and Transmission of Shareholding for Registered Intermediaries

The Securities and Exchange Board of India (“SEBI”) has issued a circular dated December 27, 2024, providing clarifications on the transfer and transmission of shareholdings among registered intermediaries, including Investment Advisers (IAs), Research Analysts (RAs), and KYC Registration Agencies (KRAs). Key highlights are as follows:

1. Unlisted Body Corporate Intermediaries:

   • Transfers among immediate relatives (as defined under SEBI’s Substantial Acquisition of Shares and Takeovers Regulations, 2011) or transmission of shareholding do not constitute a change in control.

2. Proprietary Firm Intermediaries:

   • Transfer or bequeathing of the business is considered a change in legal formation or ownership, requiring prior SEBI approval and fresh registration in the transferee's name.

3. Partnership Firm Intermediaries:

   • Transfers among partners in firms with more than two partners do not constitute a change in control.

   • For two-partner firms, the death of a partner dissolves the firm. Induction of new partners or transmission of rights to legal heirs requires SEBI approval.

4. Incoming Controlling Interests:

   • Incoming shareholders or entities must meet the “fit and proper person” criteria outlined in Schedule II of the SEBI (Intermediaries) Regulations, 2008.

This circular by SEBI brings much-needed clarity to the process of shareholding transfer and transmission among intermediaries. By outlining specific scenarios that do not constitute a change in control, SEBI has aimed to reduce procedural hurdles while ensuring regulatory oversight in cases of significant changes. This initiative reflects SEBI’s effort to balance ease of doing business with the protection of investor interests, fostering transparency and confidence in the market.