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<h1>SEBI Regulation 42 permits 12-month exemptions to foster innovation in securities markets via regulatory sandbox testing.</h1> Regulation 42 of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, allows the Board to exempt individuals or groups from certain regulatory provisions for up to twelve months. This exemption is intended to promote innovation by enabling the testing of new products, processes, services, or business models within a regulatory sandbox in the securities markets. Such exemptions are contingent upon the fulfillment of specified conditions by the applicant, which must be maintained continuously. The regulatory sandbox is defined as a controlled environment for live testing with a limited customer base to encourage innovation.