The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) are the primary legal instrument through which SEBI enforces market integrity in India's securities market. They define fraud and manipulation, list specific prohibited acts, and give SEBI sweeping investigation and enforcement powers over anyone who deals in securities. The regulations apply to any person — not just registered intermediaries — who buys, sells, or otherwise transacts in listed securities.
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Quick Summary
The PFUTP Regulations prohibit every form of fraud, manipulation, and unfair dealing in the Indian securities market. They cover all market participants — from individual investors to brokers, listed companies, and their employees — and vest SEBI with the power to investigate, restrain, impound proceeds, and cancel registrations. The most recent consolidated version was last amended on December 5, 2025 (the last substantive changes were made in June 2024 via the mule-account amendment).
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Who Is Affected
The PFUTP Regulations apply to:
- Any person buying, selling, or subscribing to listed or to-be-listed securities (as principal, agent, or intermediary), including through mule accounts
- Intermediaries registered under Section 12 of the SEBI Act: stock brokers, sub-brokers, merchant bankers, portfolio managers, investment advisers, registrars to an issue, share transfer agents, underwriters, and depository participants
- Employees and agents of all such registered entities (Explanation 2 to Regulation 4 explicitly includes them)
- Listed companies and their directors, officers, and managing directors
- Any person associated with the securities market in any manner
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What the Regulations Require (Key Prohibitions)
Regulation 3 — Absolute prohibition on fraud: No person may, directly or indirectly:
- Buy, sell, or deal in securities in a fraudulent manner
- Use any manipulative or deceptive device in connection with the issue, purchase, or sale of any listed security
- Employ any device, scheme, or artifice to defraud in connection with listed securities
- Engage in any act or practice that operates as fraud or deceit upon any person in connection with listed securities
Regulation 4 — Specific manipulative and unfair trade practices prohibited: Dealing in securities is deemed manipulative, fraudulent, or an unfair trade practice if it involves any of the following:
- Creating a false or misleading appearance of trading in the securities market (e.g., wash trades, fictitious transactions)
- Dealing in a security without intent to transfer beneficial ownership, where the purpose is to inflate, depress, or cause artificial price fluctuations
- Inducing subscription to an issue by fraudulently advancing money to secure minimum subscription
- Paying or offering money to any person to induce dealing in securities to artificially move prices
- Any act or omission amounting to manipulation of the price of a security, including manipulation of a reference or benchmark price
- Knowingly publishing false or misleading information relating to securities — including financial results, financial statements, mergers and acquisitions, or regulatory approvals — prior to or during dealing
- Entering into a securities transaction without any intention of performing it or transferring ownership
- Selling, dealing in, or pledging stolen, counterfeit, or fraudulently issued securities (with a bona fide purchaser exception)
- Disseminating false or misleading information or advice through any media (physical or digital) in a reckless manner that is designed to, or likely to, influence investor decisions
- A market participant entering into transactions on behalf of a client without the client's knowledge or instructions, or misutilising or diverting client funds or securities
- Circular transactions between persons (including intermediaries) designed to provide a false appearance of trading or to move prices
- Fraudulently inducing any person to deal in securities to enhance a broker's commission or income
- An intermediary predating or falsifying records, including contract notes, client instructions, securities balance statements, or client account statements
- Placing orders while in possession of non-public information regarding a substantial impending transaction in that security or its derivatives (front-running)
- Knowingly planting false or misleading news to induce purchase or sale of securities
- Mis-selling of securities or securities-related services — defined as sale by knowingly making a false statement, concealing material facts, concealing associated risk, or failing to assess suitability
- Illegally mobilising funds through an unauthorised collective investment scheme
Regulation 4 Explanation (clarificatory deeming provision): The following shall always be deemed manipulative, fraudulent, and an unfair trade practice:
- Any diversion, misutilisation, or siphoning off of assets or earnings of a listed company, or concealment of such acts, or manipulation of the company's books of accounts or financial statements, that directly or indirectly manipulates the price of its securities
- Any transactions through mule accounts for the purpose of indulging in manipulative, fraudulent, or unfair trade practices
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Recent Amendments
The PFUTP Regulations have been amended multiple times. The substantive amendments most relevant to current compliance are:
June 28, 2024 (most recent substantive amendment):
- Introduced the definition of "mule account" as Regulation 2(1)(da): a trading, demat, or bank account held in one person's name but effectively controlled by another person, regardless of who funds the transactions
- Amended Regulation 2(1)(b)(i) to explicitly extend the definition of "dealing in securities" to cover acts done through mule accounts
- Substituted the Explanation to Regulation 4(1) to explicitly deem mule-account transactions as manipulative, fraudulent, and unfair trade practices
January 25, 2022:
- Strengthened investigation powers under Regulation 6: added powers to call information from banks and government bodies, to apply to a designated court in Mumbai for seizure orders, and to carry out searches under the Code of Criminal Procedure
- Omitted the old Regulation 7 (which required prior Chairman or Member approval for certain investigation powers) — the Investigating Authority can now exercise those powers without separate approval
- Updated summons and service provisions under Regulation 11A; amended Regulation 12 to reference actions under the Intermediaries Regulations 2008
March 13, 2020: Broadened who may be an Investigating Authority from "officer not below Division Chief" to "any person authorised by SEBI," enabling external experts and forensic specialists to be appointed.
October 19, 2020: Clarified that diversion, siphoning, or manipulation of books of accounts of a listed company constitutes a PFUTP violation.
February 1, 2019 (2018 Amendment, effective Feb 2019): Major overhaul — broadened the definition of "dealing in securities" to include acts designed to influence investor decisions; added "knowingly" to multiple subclauses to protect innocent/accidental trades; updated mis-selling definition to cover all securities (not just mutual funds); strengthened provisions on counterfeit securities, front-running, circular trading, and dissemination of false advice.
December 5, 2025 (most recent version on sebi.gov.in): No substantive change to the PFUTP Regulations is documented in any SEBI gazette notification or secondary legal commentary for this date. The December 5, 2025 version on sebi.gov.in is a re-publication of the consolidated text following housekeeping updates (cross-references, citation corrections) made as part of SEBI's broader regulatory housekeeping exercise in Q4 2025. The operative provisions are unchanged from the June 2024 amendment. Refer to sebi.gov.in for the official consolidated text.
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Action Items for Compliance
1. Map your activities against Regulation 4 subclauses (a)–(t). Any person dealing in listed securities — not just intermediaries — should identify which categories of prohibited conduct are most relevant to their role and document controls against each.
2. Implement mule-account controls (post-June 2024). Brokers and depository participants must have procedures to detect accounts where the beneficial controller differs from the account holder. Client onboarding KYC should capture true beneficial ownership; post-trade surveillance should flag patterns consistent with mule-account use.
3. Train front-office and research staff on Regulation 4(k) (dissemination of false information) and Regulation 4(r) (false news). Finfluencers, research analysts, and anyone publishing content about securities must not recklessly disseminate false or misleading information. "Reckless or careless" is the threshold — intent to deceive is not required.
4. Review all client account-handling processes against Regulation 4(m) and 4(p). Market participants must not transact without client instructions, must not misuse client funds, and must not falsify records (contract notes, statements, instructions). Ensure audit trails are complete and unaltered.
5. Cooperate fully with any SEBI investigation under Regulation 8. Failure or refusal to produce books, records, or information to the Investigating Authority — or failure to allow access to premises — is itself a violation. Designate a compliance officer as the single point of contact for SEBI enquiries.
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Key Dates and Penalties
| Event | Detail | |---|---| | Original enactment | July 17, 2003 | | Repeals | SEBI PFUTP Regulations, 1995 | | Most recent consolidated version | December 5, 2025 | | Last substantive amendment | June 28, 2024 (mule accounts) | | Penalty for monetary violations | Section 15HA of the SEBI Act: up to ₹25 crore or three times the amount of profit made from the violation, whichever is higher | | Enforcement actions available | Trading suspension; market access ban; impoundment of proceeds; asset freeze; suspension or cancellation of intermediary registration; disgorgement of ill-gotten gains | | Service of summons | By personal delivery, fax, email (digitally signed), courier/speed post, or — on failure — by newspaper publication | | Investigation custody of documents | Up to six months |
Note: SEBI also has powers under Sections 11, 11B, and 11D of the SEBI Act to issue additional directions. Penalty amounts in specific SEBI adjudication orders vary; the ₹25 crore cap and the three-times-profit formula are the statutory ceilings under Section 15HA of the SEBI Act as of the date of this summary.
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FAQ
Q: Do the PFUTP Regulations apply to me if I am not a SEBI-registered intermediary? Yes. The regulations apply to any person dealing in listed securities, whether as a buyer, seller, issuer, adviser, or any other capacity. Individuals, companies, directors, and even unregistered persons can be investigated and penalised. SEBI's investigation authority under Regulation 5 is not limited to registered entities.
Q: What is the difference between Regulation 3 and Regulation 4? Regulation 3 is a broad, general prohibition on fraud and deceptive conduct in any form. Regulation 4 is a non-exhaustive list of specific acts that are deemed manipulative, fraudulent, or unfair trade practices — it operates "without prejudice to" Regulation 3. An act may violate both, or Regulation 3 alone. The Explanation to Regulation 4 makes clear that the list in Regulation 4(2) is not exhaustive: any act falling within Regulation 3 is prohibited even if not listed in Regulation 4.
Q: What is a "mule account" under PFUTP, and why does it matter? A mule account (Regulation 2(1)(da)) is a trading, demat, or linked bank account held in one person's name but effectively controlled by another person — regardless of who pays for the transactions. Using mule accounts to trade, or facilitating such accounts as a broker or DP, is explicitly deemed a manipulative, fraudulent, and unfair trade practice under the June 2024 amendment. This change was driven by SEBI enforcement actions revealing a pattern of fraudsters using third-party accounts to conceal the true operator's identity.
Q: Can SEBI take action before completing a full investigation? Yes. Under Regulation 10 and Regulation 11, SEBI may issue interim directions — including trading suspensions, market access bans, and asset impoundments — even before the investigation report is submitted, if it determines the action is in the interest of investors or the securities market. In urgent cases, SEBI may dispense with a pre-decisional hearing (providing a post-decisional hearing instead) by recording reasons in writing.
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This summary is for informational purposes only and does not constitute legal advice. Refer to the official SEBI website (sebi.gov.in) for the authoritative text.