SEBI reforms 2026: Buybacks, AIFs, heirs rules

What SEBI approved at the June 19 board meeting

The Securities and Exchange Board of India (SEBI) board met in Mumbai on June 19 and cleared a broad set of regulatory changes spanning investor services, mutual funds, share buybacks, alternative investment funds (AIFs), municipal bonds and internal governance. The decisions were positioned as measures to improve market efficiency, ease compliance and strengthen investor protection.

A key headline decision was the reintroduction of open market buybacks through stock exchanges from August 1, 2026, a route that had been discontinued earlier after changes in the buyback taxation framework. The board also approved a faster mechanism for launching AIF schemes, a simplified framework for transmitting securities to legal heirs, and regulatory flexibility for mutual funds to manage intraday liquidity mismatches.

Alongside these market-facing changes, SEBI approved a governance-focused package including a new Code of Conduct for Members of SEBI, 2026, and amendments to the SEBI (Employees’ Service) Regulations, 2001, with publication to follow due process including Gazette notification.

Open market buybacks return from August 1, 2026

SEBI approved amendments to the SEBI (Buy-back of Securities) Regulations, 2018, bringing back the open market buyback route through stock exchanges with effect from August 1, 2026. Companies will be able to choose between the tender offer route and open market purchases through exchanges.

The board cleared a set of operating safeguards and timelines. Open market buybacks will need to be completed within 66 working days. SEBI also approved a mandatory utilisation requirement, where at least 40% of the earmarked funds must be used in the first half of the buyback period.

On shareholder communication, SEBI approved mandatory electronic dissemination of buyback information to shareholders. The measures are intended to improve the speed and reach of disclosure for investors.

Promoter participation curbs and freezing of holdings

SEBI’s board decisions included restrictions around promoter participation in open market buybacks. Promoters and their associates will not be permitted to participate. Separately, SEBI approved freezing of promoter shareholding at the ISIN level during the buyback window.

The approvals aim to ensure that the open market route operates with clear guardrails on who can transact during the buyback period. The ISIN-level freeze is designed to prevent trades by promoters and their associates while the buyback is underway.

These safeguards were cleared alongside the 66-working-day completion window and the 40% utilisation threshold for the first half of the offer period.

Merchant banker appointment made optional for buybacks

SEBI also approved a change to reduce compliance costs by making the appointment of a merchant banker discretionary for buybacks. Where a company does not appoint a merchant banker, the responsibilities typically handled by the merchant banker must be distributed among the company, the compliance officer, the statutory auditor, the secretarial auditor and stock exchanges.

This change is part of SEBI’s broader effort to simplify processes while retaining role clarity through accountability across the company and key gatekeepers.

The board’s approval sits alongside other process changes, such as electronic dissemination of buyback information, which can make operational execution more standardised even when a merchant banker is not appointed.

Mutual funds allowed intraday borrowing for liquidity mismatches

The board approved amendments to the SEBI (Mutual Funds) Regulations, 2026, to allow mutual funds to avail intraday borrowing. The stated use-case is managing temporary liquidity mismatches arising from pay-in and pay-out timing gaps, foreign exchange settlements, and mark-to-market derivative payments.

SEBI clarified that this facility is in addition to the existing borrowing limit of 20% of scheme net assets for unitholder payouts. The intraday borrowing must be repaid by the end of the trading day and cannot be used as a leverage tool.

Asset management companies (AMCs) will need to maintain proper documentation and put in place a trustee-approved policy to govern the use of intraday borrowing.

GARUDA green channel to speed up AIF scheme launches

SEBI introduced GARUDA (Green-Channel: AIF Rollout Upon Document Acknowledgement) to shorten the time taken to launch AIF schemes. Under the approved framework, regular AIF schemes can be launched within 10 working days.

The approvals also include a faster track for specific categories. AI-only schemes and Angel Funds, which cater exclusively to accredited investors, will be allowed to launch immediately after registration or filing of the placement memorandum with SEBI, without requiring merchant banker review.

Separately, the material also referenced that the GARUDA mechanism would cut the timeline from a current 30-day waiting period to 10 working days for eligible funds. SEBI said the change is intended to help deploy capital faster and improve ease of doing business.

Municipal bond changes: refinancing, pooled financing, retail incentives

To deepen India’s municipal bond market, SEBI approved changes to municipal debt regulations. Municipalities will be allowed to raise funds to refinance existing project debt, and SEBI laid down a framework for pooled financing by multiple municipalities.

To improve retail participation, issuers will be permitted to offer incentives such as additional interest or issue-price discounts to categories including retail investors, senior citizens and women. SEBI also reduced the face value for privately placed municipal bonds to as low as INR 10,000 under specified conditions.

The combined changes are aimed at widening issuer flexibility and improving participation, particularly for smaller ticket investors, without changing the nature of municipal bonds as debt instruments.

Easier transmission of securities to legal heirs and claimants

Among investor-service reforms, the board approved a comprehensive overhaul of the framework for transmission of securities to legal heirs and claimants of deceased investors. SEBI created a new Quick Transmission Processing (QTP) category for small-value claims, with minimal documentation.

Under QTP, the claim value caps are INR 10,000 for physical holdings and INR 30,000 for dematerialised holdings. Beyond QTP, SEBI also approved doubling of limits for simplified documentation. The limit for physical holdings per listed company was increased from INR 5 lakh to INR 10 lakh. For demat holdings per beneficial owner, the limit was increased from INR 15 lakh to INR 30 lakh.

SEBI also approved multiple documentation simplifications. PAN submission is no longer required for transmission, and the mandatory requirement of probate of wills has been removed wherever succession laws permit. SEBI permitted a combined affidavit-cum-No Objection Certificate (NOC). Death certificates carrying QR codes will be accepted for verification, and additional verification methods have been introduced for death certificates issued overseas.

Governance package: Code of Conduct and conflict-of-interest framework

SEBI’s board approved a new Code of Conduct for Members of SEBI, 2026, along with amendments to the SEBI (Employees’ Service) Regulations, 2001. The final Code and ESR amendments will be published on SEBI’s website after due process, including Gazette notification.

The material also stated that the SEBI Board approved an enhanced conflict-of-interest framework for its members and officials, based on recommendations of a high-level committee. The framework includes stricter norms around disclosures, trading restrictions and recusals, a digital system to track conflicts, and the creation of an Office of Ethics and Compliance.

These steps address internal governance and are intended to raise confidence in regulatory decision-making processes.

Other proposals referenced in the approvals

Apart from the headline items, the board also approved amendments relating to securitised debt instruments and the transfer of the Social Stock Exchange Capacity Building Fund to a Section 8 company. It also selected SME capital raising as the theme for an independent regulatory review during FY27.

The material further referenced that SEBI cleared measures aimed at reviving trading activity in agricultural commodity derivatives.

While these items received less attention than buybacks, AIFs and transmission, they add to the breadth of the June 19 decisions.

Key numbers and effective dates at a glance

Transmission limits and documentation changes

Market impact: what these changes shift in practice

The return of open market buybacks gives listed companies an additional route alongside tender offers, with SEBI tying the mechanism to a defined 66-working-day execution window. The 40% utilisation requirement in the first half of the period is intended to reduce the risk of slow or symbolic execution, using a measurable deployment benchmark.

For investors, mandatory electronic dissemination of buyback information can improve access to time-sensitive disclosures. At the same time, restrictions on promoters and associates, combined with an ISIN-level freeze during the buyback window, are designed to tighten conduct expectations and reduce the scope for transactions that could undermine the intent of the buyback.

In mutual funds, intraday borrowing acknowledges operational timing gaps without widening leverage. By requiring same-day repayment, documentation, and a trustee-approved policy, SEBI has attempted to balance liquidity management flexibility with controls that prevent structural borrowing.

Why the reforms matter: a policy signal across market segments

The reforms indicate SEBI’s focus on execution efficiency in market operations, from buyback timelines to AIF scheme launches. GARUDA aims to reduce administrative waiting periods, particularly for accredited-investor-focused categories such as AI-only schemes and Angel Funds, where investor profiles are more specialised.

The transmission overhaul targets a long-standing pain point for families and claimants. By introducing QTP for small-value claims and doubling simplified documentation limits, SEBI is attempting to reduce procedural friction. Removing PAN submission requirements in transmission and permitting QR-enabled death certificates can also reduce back-and-forth on verification.

In municipal bonds, SEBI’s approvals combine issuer-side flexibility through refinancing and pooled financing with investor-side participation tools like incentives and smaller face value for private placements under specified conditions.

Conclusion

SEBI’s June 19 board meeting cleared reforms across buybacks, mutual fund liquidity tools, faster AIF launches, municipal bond rules, and a simplified securities transmission framework for legal heirs. The open market buyback route will return from August 1, 2026, with a 66-working-day window and defined safeguards.

SEBI has also approved internal governance changes through a new Code of Conduct for Members of SEBI, 2026, and amendments to employee service regulations, with publication to follow after due process including Gazette notification.