Summary of this article
Sebi has introduced a joint inspection framework for brokers and depository participants, effective December 1, 2025
Currently, brokers and depository participants undergo separate inspections by each market infrastructure institutions
This decision aims to ease compliance by replacing multiple inspections with a single, coordinated one.
MIIs have until November 1 to put in place a joint SOP and information-sharing system.
The Securities and Exchange Board of India (Sebi) has introduced joint annual inspection of brokers and depository participants (DPs) by all market infrastructure institutions (MIIs). In a circular issued on August 7, 2025, Sebi said this decision has been taken “to ensure ease of doing business and to take comprehensive view of entity’s operations across all MIIs along with optimum utilisation of resources.”
The new framework will come into effect from December 1, 2025.
Why The Need For Joint Inspection
Under existing norms, stock brokers and DPs undergo inspections by each MII, such as stock exchanges, clearing corporations, and depositories, individually. Sebi said in the circular: “Such an exercise unwarrantedly taxes the intermediaries due to frequent visits for inspections by different MIIs which result in disproportionate diversion of resources leading to disruption in the routine operations of the entities.”
To address this, Sebi directed that inspections for brokers registered across multiple MIIs be conducted jointly. “Entities selected for annual inspections shall be inspected for all segments jointly by all exchanges along with their depository participant (DP) operations (if broker is also registered as DP) and clearing activity (if the broker is undertaking clearing for other brokers),” Sebi said.
MIIs Asked To Set Up Information-Sharing Mechanism
To support this joint inspection system, MIIs have been asked to establish an information-sharing mechanism and develop a joint standard operating procedure (SOP) by November 1, 2025. One of the MIIs will be designated as the lead MII and will be responsible for initiating enforcement action.
Sebi also clarified that the new joint inspection framework does not limit the ability of MIIs to conduct special or limited inspections when required.
“Notwithstanding the above, MIIs shall have the prerogative to carry out special purpose/limited inspections based on any triggers found during investor complaint resolution/arbitration, complaints on specific malpractices of a broker or references from various authorities,” the circular said.
Sebi Revises Inspection Criteria
Sebi has also revised the inspection criteria for conducting annual inspection.
According to the revised criteria, the top 25 entities with high and recurring penalties for high-risk compliance issues such as short reporting of margin, client code modification, or computer to computer link (CTCL) mismatches will be inspected every year, regardless of when they were last inspected.
Similarly, brokers with the highest percentage of investor complaints and arbitration cases, and those with a high-risk score under Sebi’s risk-based supervision model, will also be inspected annually.
Entities not falling under any of the above categories will be inspected at least once every three years, Sebi said. However, the circular stated that “entities inspected in preceding two years by any of the MII’s/Sebi and/or entities that have not executed a single trade during last two financial years may not be considered for inspection under the above criteria.”
Professional clearing members (PCMs) will continue to be inspected every two years by clearing corporations, Sebi added.
