Can a Stock Broker Also Undertake NBFC Activities in the Same Entity?
SEBI’s recent informal guidance to Relitrade Stock Broking Private Limited addresses whether a SEBI-registered stock broker can also obtain registration as an NBFC from the RBI and undertake NBFC activities through the same corporate entity.
In its informal guidance dated 10 August 2026, SEBI clarified that, under the regulatory framework presently in place, a stock broker cannot undertake NBFC activities merely by obtaining RBI registration and relying on Regulation 12 of the SEBI (Stock Brokers) Regulations, 2026 (“Stock Brokers Regulations”).
The issue arises because Regulation 12 expressly contemplates activities regulated by other financial-sector regulators, including the RBI. The question, therefore, was whether this provision itself permits a stock broker to add NBFC activities to its existing business.
Background: What does Regulation 12 permit?
The SEBI (Stock Brokers) Regulations, 2026, notified on 7 January 2026, consolidate the regulatory framework governing stock brokers and clearing members. Regulation 12, titled “Other permitted activities”, provides that a stock broker may undertake an activity falling within the regulatory purview of another financial-sector regulator or authority “in the manner as may be specified by the Board.” Such activity would remain under the regulatory purview of the relevant regulator.
The provision expressly recognises regulators including the RBI, IRDAI, PFRDA, IFSCA, MCA and IBBI as financial-sector regulators. While this appears to permit a stock broker to undertake other regulated financial activities, the permission is expressly subject to the manner specified by SEBI. It was in this context that Relitrade sought SEBI’s informal guidance.
The issue before SEBI
Relitrade, a SEBI-registered stock broker and depository participant, proposed to commence RBI-regulated NBFC activities while continuing its stock broking business through the same entity.It sought SEBI’s views on matters including:
• whether the same entity could simultaneously operate as a stock broker and an RBI-registered NBFC;
• the segregation, accounting and internal control requirements for the two businesses;
• the treatment of net worth under the two regulatory frameworks; and
• whether commencement of NBFC activities would constitute a material change requiring regulatory intimation.
SEBI’s informal guidance
SEBI noted that Regulation 12 does permit stock brokers to undertake activities regulated by another financial-sector regulator, but only in the manner specified by SEBI. SEBI identified existing frameworks permitting certain such activities, including:
• activities relating to the Negotiated Dealing System – Order Matching (NDS-OM) platform for dealing in Government Securities under the RBI framework in accordance with February 11, 2025 Circular; and
• specified securities-market activities in GIFT-IFSC under the IFSCA framework in accordance with May 2, 2025.
The GIFT-IFSC framework illustrates how Regulation 12 operates in practice. SEBI’s May 2025 circular permits stock brokers to undertake specified securities-market activities in GIFT-IFSC through a Separate Business Unit (SBU) or a subsidiary, subject to segregation and ring-fencing, separate accounting and separate net-worth treatment. The SBU’s activities remain under IFSCA’s jurisdiction.
No corresponding framework has been specified for NBFC activities. Accordingly, SEBI clarified that a stock broker cannot presently undertake NBFC activities under Regulation 12, notwithstanding that NBFCs are regulated by the RBI.
Why RBI registration alone is not sufficient
The guidance makes an important distinction between:
(i) being regulated by another financial-sector regulator; and
(ii) being permitted by SEBI to undertake that activity as a stock broker.
Regulation 12 does not operate as a blanket permission for stock brokers to undertake any activity falling within another regulator’s jurisdiction. The relevant activity must first be permitted in the manner specified by SEBI. Thus, an RBI registration would not, by itself, enable a SEBI-registered stock broker to commence NBFC activities within the same entity.
This also means that internal segregation, separate accounting or additional controls cannot cure the absence of an enabling SEBI framework. The preliminary question is whether the stock broker is permitted to undertake the NBFC activity at all.
Key takeaway
SEBI’s informal guidance clarifies that a SEBI-registered stock broker cannot obtain registration as an NBFC from the RBI and undertake NBFC activities through the same legal entity under the present regulatory framework. Although Regulation 12 of the Stock Brokers Regulations, 2026 contemplates a stock broker undertaking activities regulated by another financial-sector regulator, such activities can be undertaken only in the manner specified by SEBI. Since SEBI has not specified any framework permitting stock brokers to undertake NBFC activities, an existing stock broker cannot presently add an RBI-regulated NBFC business within the same entity.
For structuring purposes, therefore, a group seeking to operate both a SEBI-registered stock broker and an RBI-regulated NBFC would need to consider separate entities, unless and until SEBI specifies a framework permitting the activities to be undertaken within the same entity.
