Alerts & Updates 8th Aug 2025
The Securities and Exchange Board of India (“SEBI”) issued a circular dated August 07, 2025 (“Circular”), focusing on the burdens relating to the inspections of stockbrokers and depository participants (“DP”) conducted by each Market Infrastructure Institutions (“MIIs”) separately and consequently, taxing the various resources of an intermediary attending multiple inspections of similar nature and disrupting their routine business.
This Circular aims to provide a streamlined policy for an annual inspection of stockbrokers and DPs, conducted jointly by the MIIs to enhance the ease of doing business.
| Criteria 1 – following shall be inspected irrespective of the last date of inspection | |
Top 25 entities for high and recurring penalties for –
Any other high-risk non-compliance |
|
| Top 25 entities in terms of investor complaints and arbitrations filed by investors (basis percentage of active clients) | |
| Top 25 entities based on ‘High Risk Score’ under Risk Based Supervision | |
| Criteria 2 – following shall be inspection once in every three years | |
| Entities not following in Criteria 1 | |
| Criteria 3 – entities not eligible for inspection | |
| Entities inspection in preceding two years by any one of the MIIs and it has not executed a single trade in the last 2 financial years | |
| Criteria 4 – inspections conducted jointly by clearing corporations every 2 years | |
| Applicable on professional clearing members | |
Irrespective of the above, MIIs may carry out special purpose/limited inspections as they deem fit from time to time based on any triggering alerts/observations.
This Circular shall be effective from December 1, 2025.
ELP Comments
The emerge of uniformity of inspection conducted by various MIIs shall not only reduce disruption of business, it will also reduce multiplicity of proceedings initiated against an intermediary based on the observations made during the joint inspection. It will further lessen inconsistencies in the standards of compliance recommended by each MII and therefore, eliminate issuance of contradictory orders passed by MIIs.
Especially for Qualified Stockbrokers with multiple disclosure requirements pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), it will be a reputational boon when MIIs shall make uniform and singular form of observations which if resulting in enforcement, shall not attract multiple forms of disclosures, creating a clear image of allegations/violations established, if any.
The agenda to ease the business of the intermediaries while ensuring compliance with the applicable provisions is clearly another step taken by SEBI in the interest of investors by encouraging the MIIs in following an SOP that quashes any disruption in the operations of the businesses of the intermediaries and therefore, eradicating any procedural lapses in their investigation process.
Circular dated August 7, 2025, issued by SEBI is availablehere.
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KC Jacob, Partner, Email – kcjacob@elp-in.com
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Prakshal Jain, Advocate, Email- prakshaljain@elp-in.com
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