New Delhi, Feb. 4 -- The Securities and Exchange Board of India (Sebi) is planning a revamp of its 'fit and proper' framework for market intermediaries as some of the rules may be too rigid and risk penalizing individuals and firms before wrongdoing is established.

In a consultation paper issued on Wednesday, the markets regulator said experience gained from enforcing the rules over the past five years, as well as global best practices, warrant a review of Schedule II of the Intermediaries Regulations. The move follows representations from market participants, who flagged onerous compliance requirements and the risk of irreparable harm arising from premature disqualifications.

The draft paper proposes a rethink of provisions that trigge...