Following high interest, the regulator extended the scheme, which began on June 16, 2025 allowing brokers to settle cases by paying a penalty, rather than facing long-term litigation. The settlement scheme was first extended to October 16, 2025 following which the majority chose to go for settlement with the regulator.
In Sebi parlance, opting to settle an alleged violation does not mean the parties have admitted to their mistake.
The Sebi proceedings against these stock brokers began in 2025 for allegedly violating regulations by associating with unregulated algorithmic trading platforms like Tradetron that promised guaranteed returns, violating a September 2022 Sebi circular. These brokers faced scrutiny for integrating their APIs with these platforms, allowing clients to engage in risky algo strategies.
Brokers also allowed their clients to use API-linked, third-party algo trading platforms that advertised assured or consistent profits.
This crackdown aimed at curbing marketing of risky, unregulated algorithmic strategies to retail investors, forcing stricter compliance over automated trading systems, with a comprehensive new framework made mandatory by April 1, 2026.
Last September, Sebi extended the settlement window till October 16, 2025 after “observing that a number of entities have shown interest in availing the scheme. Considering the interest of entities in availing the scheme, the competent authority has extended the period of the scheme till October 16, 2025”.