SEBI streamlines inspections of market intermediaries, cuts routine visits

The Securities and Exchange Board of India (SEBI) has revised its inspection process for market intermediaries, cutting down routine inspections and shifting to a risk-based, coordinated approach starting from the fiscal year 2027 (FY27). This change aims to bolster regulatory oversight while enhancing the ease of doing business for intermediaries.

According to SEBI, the inspection framework has been refined to integrate new risk parameters, allowing for the identification and prioritization of entities requiring inspections. The regulatory overhaul, discussed with Market Infrastructure Institutions (MIIs) and the Supervisory Body for Investment Advisers (IAs) and Research Analysts (RAs), has led to a reduction in the targeted number of inspections for FY27 to approximately one-third of those conducted in the previous financial year.

SEBI continues to rely on stock exchanges and depositories for regular inspections of stock brokers and depository participants. Under the new system, routine annual comprehensive inspections of compliant entities, such as Qualified Stock Brokers (QSBs), will be discontinued. Instead, SEBI will focus on entities consistently flagged in risk-based shortlisting, possessing high risk scores, or raising multiple alerts from exchanges.

SEBI also aims to eliminate redundancy by conducting inspections of entities holding multiple intermediary registrations jointly, wherever feasible. The regulator has enhanced the importance of exchange-generated alerts, investor complaints, and social media inputs in selecting entities for inspection. Shortlisting will now occur quarterly, and inspections may be triggered based on market intelligence and references from SEBI’s regional and local offices, encompassing issues like technical glitches, cyber incidents, and authorized representatives of stockbrokers.