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.
๐๐๐ฒ ๐ฎ๐ฉ๐๐๐ญ๐๐ฌ:
1. ๐๐จ๐ข๐ง๐ญ ๐๐ง๐ง๐ฎ๐๐ฅ ๐๐ง๐ฌ๐ฉ๐๐๐ญ๐ข๐จ๐ง๐ฌ: 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. ๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐ก๐๐ซ๐ข๐ง๐ : 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. ๐๐๐ฏ๐ข๐ฌ๐๐ ๐๐ข๐ฌ๐ค-๐๐๐ฌ๐๐ ๐๐๐ฅ๐๐๐ญ๐ข๐จ๐ง ๐๐ซ๐ข๐ญ๐๐ซ๐ข๐: 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 ย SEBIโs Risk-Based Supervision scores. The other intermediaries shall be inspected by the MIIs once in three years.
4. ๐๐ง๐ฌ๐ฉ๐๐๐ญ๐ข๐จ๐ง ๐๐ฑ๐๐ฆ๐ฉ๐ญ๐ข๐จ๐ง๐ฌ: 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. ๐๐ฉ๐๐๐ข๐๐ฅ ๐๐ฎ๐ซ๐ฉ๐จ๐ฌ๐ ๐๐ง๐ฌ๐ฉ๐๐๐ญ๐ข๐จ๐ง๐ฌ: 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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