Description
SEBI introduces joint annual inspection policy for brokers and DPs by MIIs to reduce inspection burden and improve supervision effectiveness.
Summary
SEBI has introduced a new joint annual inspection policy for Market Infrastructure Institutions (MIIs) to replace separate inspections with coordinated joint inspections. The policy aims to ease the burden on stock brokers and depository participants while improving supervision effectiveness through information sharing mechanisms.
Key Points
- Joint annual inspections will replace separate inspections by each MII
- All segments including DP operations and clearing activities will be inspected together
- Information sharing mechanism established between MIIs for entities with multiple registrations
- Revised criteria for entity selection based on risk factors
- Professional Clearing Members to be inspected jointly once in two years
Regulatory Changes
- Joint Inspection Framework: Entities selected for annual inspections will be inspected jointly by all MIIs at one time instead of separate visits
- Information Sharing: MIIs must establish mechanism to share inspection observations for entities with multiple registrations
- Selection Criteria Revision:
- Top 25 entities with high recurring penalties for compliance issues
- Top 25 entities with highest investor complaints as percentage of active clients
- Top 25 entities with high risk scores under Risk Based Supervision
- Inspection Frequency: Entities not in above categories inspected at least once in three years
Compliance Requirements
- Stock Exchanges, Depositories, and Clearing Corporations must coordinate joint inspections
- MIIs must establish information sharing mechanisms for inspection observations
- Entities with multiple registrations subject to unified inspection approach
- Professional Clearing Members subject to joint inspection by Clearing Corporations every two years
Important Dates
- Circular effective from August 07, 2025
- Entities not inspected in last three years to be prioritized under new framework
- Entities inspected in preceding two years may be exempted from current cycle
Impact Assessment
Operational Impact: Significant reduction in inspection burden on brokers/DPs who previously faced multiple separate inspections from different MIIs. This will reduce resource diversion and operational disruption.
Regulatory Impact: Enhanced supervision effectiveness through coordinated approach and information sharing between regulators. Risk-based selection criteria will focus resources on high-risk entities.
Business Impact: Improved ease of doing business for intermediaries while maintaining robust regulatory oversight through streamlined processes.
Impact Justification
Streamlines inspection process for brokers/DPs, reducing operational burden while maintaining regulatory oversight