Description

SEBI implements joint annual inspections by market infrastructure institutions instead of separate inspections to reduce compliance burden on intermediaries.

Summary

SEBI has introduced a new policy for joint annual inspections by Market Infrastructure Institutions (MIIs) to ease the compliance burden on stock brokers and depository participants. Instead of separate inspections by each exchange, depository, and clearing corporation, entities will now be inspected jointly by all relevant MIIs simultaneously.

Key Points

  • Joint annual inspections will replace separate inspections by different MIIs
  • Information sharing mechanism established between MIIs for inspection observations
  • Revised criteria for selecting entities for annual inspection
  • Top 25 entities in high-risk categories must be inspected regardless of last inspection date
  • Entities not in high-risk categories inspected at least once every three years
  • Professional Clearing Members inspected jointly once every two years

Regulatory Changes

  • Joint Inspection Framework: All segments of selected entities (equity, derivatives, DP operations, clearing activities) inspected simultaneously by relevant MIIs
  • Information Sharing: MIIs must establish mechanisms to share inspection observations for entities with multiple registrations
  • Revised Selection Criteria: Focus on high-penalty entities, high-complaint entities, and high-risk score entities under Risk Based Supervision

Compliance Requirements

  • For MIIs: Establish information sharing mechanisms and coordinate joint inspections
  • For Brokers/DPs: Prepare for comprehensive joint inspections covering all registered segments
  • Inspection Frequency: High-risk entities inspected annually; others at least once in three years
  • Exemptions: Entities inspected in preceding two years or with no trades in last two financial years may be exempted

Important Dates

  • Circular Date: August 7, 2025
  • Implementation: Immediate effect for future inspection cycles
  • Inspection Cycle: Professional Clearing Members - once every two years; Others - at least once every three years

Impact Assessment

Positive Impact: Significantly reduces compliance burden on intermediaries by eliminating multiple separate inspections, optimizes resource utilization, and reduces operational disruption. Operational Benefits: Streamlined inspection process, comprehensive view of entity operations across all segments, improved supervision effectiveness through information sharing. Risk Management: Enhanced focus on high-risk entities through revised selection criteria based on penalties, complaints, and risk scores.

Impact Justification

Significant procedural change affecting all stock brokers and depositories, reducing compliance burden through joint inspections