Capital Market and Securities Laws · Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market

PFUTP Regulations 2003: Overview and Definitions

Updated 11 October 2026 · Fact-checked

The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 are made under the SEBI Act, 1992. They bar fraud and unfair trade practices in dealing in securities. To answer questions, state the source, the scope, the definition asked, and then apply it to the facts.

Understand PFUTP Regulations 2003: Overview and Definitions

Securities markets run on trust. If prices can be rigged or investors misled, people stop investing. So the law bars fraud and unfair practices in the market. The SEBI Act, 1992 sets the base. Section 12A says no person shall directly or indirectly use any manipulative or deceptive device, employ any device, scheme or artifice to defraud, or engage in any act or practice that operates as fraud or deceit, in connection with the issue or dealing in securities that are listed or proposed to be listed on a recognised stock exchange.

The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, called the PFUTP Regulations, are the detailed rules made by SEBI under the Act. The Act gives the prohibition and the penalty. The Regulations spell out what counts as fraud and what conduct is barred. Think of Section 12A as the general ban and the Regulations as the working definitions and list of banned acts.

The Regulations begin with a short title and commencement, then a definitions regulation. Two definitions matter most. Fraud is defined inclusively. It covers an act, omission, concealment or misrepresentation made by a person, or with that person's connivance or by an agent, to induce another to deal in securities, whether or not there is any wrongful gain or avoidance of loss. The definition also lists examples, such as a knowing misrepresentation of a material fact, giving a false statement, and a dishonest concealment. The key point is that gain or loss need not be proved. Dealing in securities includes the act of buying, selling or subscribing in securities, or agreeing to do so, as principal or agent. It also covers any act that is a part of that activity.

The Regulations apply to dealings in securities. Securities for this purpose are as defined in the Securities Contracts (Regulation) Act, 1956. They also work with the SEBI Act's penalty. If a person indulges in fraudulent and unfair trade practices relating to securities, Section 15HA provides a penalty of not less than five lakh rupees, which may extend to twenty-five crore rupees or three times the profits made, whichever is higher.

For the exam, learn the structure: source power, purpose, key definitions, then what is prohibited and what follows. Always write the definitions in your own words but keep the key phrases. Check the exact text of the Regulations in the ICSI study material for the full list of examples in the fraud definition.

Key rules to remember

Section 12A, SEBI Act (base prohibition): No person shall directly or indirectly use manipulative or deceptive devices, defraud, or act as fraud or deceit in connection with issue or dealing in securities listed or proposed to be listed on a recognised stock exchange; This is the Act-level ban that the PFUTP Regulations give effect to.
Fraud (core idea): Act, omission, concealment or misrepresentation, by a person or with connivance or by an agent, to induce another to deal in securities, whether or not there is wrongful gain or avoidance of loss; Inclusive definition. Gain or loss need not be proved. Recall the examples from your study material.
Dealing in securities: Buying, selling or subscribing, or agreeing to buy, sell or subscribe, as principal or agent, and any act that forms part of it; Wide enough to cover agreements and acts connected with the dealing.
Penalty, Section 15HA: Not less than ₹5,00,000; may extend to ₹25,00,00,000 or 3 × profits made, whichever is higher; The floor is five lakh rupees. The upper limit is the higher of the two amounts.
SEBI measures, Section 11(4): By reasoned order, SEBI may suspend trading, restrain access to the market, impound proceeds, attach property for up to 90 days, or direct no disposal of assets; Hearing must be given before or after the order. Attachment needs Special Court confirmation within ninety days.

How to solve PFUTP Regulations 2003: Overview and Definitions questions

Use this method for any question on the Regulations, whether theory, definition or case-based.

1Identify what is asked: overview, a definition, applicability, or a fact situation.
2Name the source: the Regulations are made by SEBI under the SEBI Act, 1992, and give effect to the ban in Section 12A.
3State the relevant definition in your own words, keeping key terms such as inducement, misrepresentation, concealment, principal or agent.
4For a fact case, list the facts that match each element: who acted, what was done, whether it was meant to induce dealing in securities.
5Note that wrongful gain or loss avoided need not be shown for fraud.
6Add the consequence: penalty under Section 15HA and SEBI's powers under Section 11 and Section 11B.
7End with a clear conclusion in one sentence.

Quickest way: Four-line answer frame

When to use it: Use when time is short, or for 4 to 5 mark questions on overview or definitions.

Line 1: The PFUTP Regulations, 2003 are made by SEBI under the SEBI Act, 1992 to stop fraud and unfair practices in securities dealing.
Line 2: Give the definition asked, with its key phrases.
Line 3: Add one point of difference or width, such as no need to prove gain or loss.
Line 4: Add the penalty under Section 15HA and conclude.

Common mistakes in PFUTP Regulations 2003: Overview and Definitions

Saying fraud needs proof of wrongful gain or loss.
Students carry over ideas from the general law of fraud and contract.
Fix: Write that under the Regulations it is immaterial whether there is any wrongful gain or avoidance of loss.
Treating the Regulations as a separate law from the SEBI Act.
The two have different names, so students study them apart.
Fix: State that the Regulations are subordinate rules made under the Act, and tie them to Section 12A.
Giving the wrong penalty figures under Section 15HA.
Students mix up the minimum and maximum amounts.
Fix: Remember: floor ₹5,00,000; ceiling the higher of ₹25,00,00,000 or three times the profits.
Limiting dealing in securities to buying and selling.
The everyday meaning of dealing is narrow.
Fix: Include subscribing, agreeing to buy or sell, acting as principal or agent, and acts forming part of the dealing.
Applying Section 12A to any security at all.
Students skip the listing condition in the section.
Fix: Quote the condition: securities listed or proposed to be listed on a recognised stock exchange.

Worked examples

Example 1

Explain the meaning of 'fraud' under the SEBI (PFUTP) Regulations, 2003. Is proof of wrongful gain necessary?

Show the solution

Provision: The Regulations are made by SEBI under the SEBI Act, 1992 to prohibit fraud and unfair trade practices relating to the securities market.
Definition: Fraud includes an act, omission, concealment or misrepresentation made by a person, or with that person's connivance or by an agent, to induce another person to deal in securities.
Examples in the definition include a knowing misrepresentation of a material fact and a dishonest concealment of material facts.
Test on gain: The definition says it applies whether or not there is any wrongful gain or avoidance of loss.
Link: The conduct also falls within the ban in Section 12A of the SEBI Act.

Answer: Fraud is an inducing act, omission, concealment or misrepresentation connected with dealing in securities. Proof of wrongful gain or avoided loss is not necessary.

Example 2

Rahul, a broker's agent, tells Meera that a listed company has won a large export order, knowing the statement is false, so that she will buy its shares. Meera buys. Rahul earns no commission on the trade. Has Rahul committed fraud under the PFUTP Regulations?

Show the solution

Provision: Fraud includes a misrepresentation made by a person or an agent to induce another to deal in securities.
Facts: Rahul knowingly made a false statement of a material fact about a listed company.
Inducement: The statement was made so that Meera would buy shares, and she did. This is dealing in securities, which includes buying.
Gain: Rahul earned no commission, but the definition applies whether or not there is wrongful gain or avoided loss.
Consequence: Section 12A bars acts operating as fraud or deceit in connection with dealing in listed securities, and Section 15HA allows a penalty of not less than ₹5,00,000.

Answer: Yes. Rahul's knowing false statement to induce Meera to buy is fraud. The absence of gain is irrelevant, and he is liable to penalty under Section 15HA.

Exam tips

Write the source line first: made by SEBI under the SEBI Act, 1992, linked to Section 12A.
Learn the definition of fraud word by word, and mention that gain or loss need not be shown.
For case questions, use the order: provision, facts, conclusion, and cite Section 12A or 15HA where it matters.
Keep the Section 15HA figures ready: ₹5,00,000 floor and the higher of ₹25,00,00,000 or three times the profits.
Papers are written, so a clear short answer with correct terms earns more than a long vague one.

Practice questions from Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market

PFUTP Regulations 2003: Overview and Definitions: frequently asked questions

What are the PFUTP Regulations, 2003?

They are the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. SEBI made them under the SEBI Act, 1992. They define fraud and list the conduct barred in dealing in securities.

Is wrongful gain needed to prove fraud under the PFUTP Regulations?

No. The definition of fraud applies whether or not there is any wrongful gain or avoidance of loss. What matters is the act, omission, concealment or misrepresentation made to induce dealing in securities.

How are the PFUTP Regulations linked to Section 12A of the SEBI Act?

Section 12A is the Act's general ban on manipulative and deceptive devices, fraud and insider trading. The Regulations give the detailed definitions and prohibited acts that put this ban into effect.

What is the penalty for fraudulent and unfair trade practices?

Section 15HA of the SEBI Act provides a penalty of not less than five lakh rupees. It may extend to twenty-five crore rupees or three times the profits made, whichever is higher.