Until now, intermediaries, particularly brokers and depository participants, were subjected to multiple inspections by different Market Infrastructure Institutions (MIIs), often within the same year, leading to unwarranted duplicative compliance, disruption of business operations, and resource fatigue. The absence of coordination among MIIs also resulted in fragmented oversight and inconsistent enforcement.
In response, SEBI, through its circular dated August 07, 2025, has introduced a comprehensive framework for joint annual inspections by MII, including stock exchanges, depositories, and clearing corporations in order to facilitate ease of doing business.
𝐊𝐞𝐲 𝐮𝐩𝐝𝐚𝐭𝐞𝐬:
1. 𝐉𝐨𝐢𝐧𝐭 𝐀𝐧𝐧𝐮𝐚𝐥 𝐈𝐧𝐬𝐩𝐞𝐜𝐭𝐢𝐨𝐧𝐬: Brokers and DPs will now face a single, coordinated inspection by all relevant MIIs, covering trading, DP, and clearing functions, reducing inspection fatigue and overlap.
2. 𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐒𝐡𝐚𝐫𝐢𝐧𝐠: To improve the effectiveness of supervision, MIIs will establish an information sharing mechanism with one another for sharing of inspection observations of entities who hold multiple registrations with MIIs.
3. 𝐑𝐞𝐯𝐢𝐬𝐞𝐝 𝐑𝐢𝐬𝐤-𝐁𝐚𝐬𝐞𝐝 𝐒𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐂𝐫𝐢𝐭𝐞𝐫𝐢𝐚: The revised criteria for annual inspection is as follows:
– Top 25 entities paying high and recurring penalties for recurring compliance violations (e.g., margin shortfalls, CTCL mismatches).
– Top 25 entities with highest investor complaints or arbitration cases per active clients.
-Top 25 based on SEBI’s Risk-Based Supervision scores. The other intermediaries shall be inspected by the MIIs once in three years.
4. 𝐈𝐧𝐬𝐩𝐞𝐜𝐭𝐢𝐨𝐧 𝐄𝐱𝐞𝐦𝐩𝐭𝐢𝐨𝐧𝐬: Entities inspected in the last two years that have not executed a single trade during last two financial years may not be considered for inspection.
5. 𝐒𝐩𝐞𝐜𝐢𝐚𝐥 𝐏𝐮𝐫𝐩𝐨𝐬𝐞 𝐈𝐧𝐬𝐩𝐞𝐜𝐭𝐢𝐨𝐧𝐬: MIIs shall retain the prerogative to conduct special purpose or limited inspections at any time, triggered by patterns in complaints, arbitration outcomes, specific malpractice allegations, or regulatory referrals, regardless of the timing of the last inspection.
The new regime takes effect from December 01, 2025. MIIs are required to frame a Joint SOP and amend their bye-laws/rules accordingly by November 01, 2025.
The Circular is available at https://lnkd.in/gMpfDGpF
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