SEBI Streamlines Market Oversight: Stock Exchanges and Depositories Mandated for Joint Inspections of Intermediaries
The Securities and Exchange Board of India (SEBI) has introduced a significant shift in the regulatory oversight of market intermediaries, effective from the Financial Year 2026-27. The move aims to enhance efficiency and robustness within the securities ecosystem by integrating inspection duties. SEBI is mandating joint inspections involving stock exchanges and depositories for various intermediaries.Mandating Joint Inspections for Robust Supervision
In a key regulatory overhaul, SEBI is implementing an enhanced approach to inspecting market intermediates starting FY2026-27. This strategic shift requires Stock Exchanges and Depositories to conduct joint inspections alongside SEBI for various entities. These deliberations were conducted after consulting with Market Infrastructure Institutions (MIIs) and the Supervisory Body for IAs/RAs.Rationalizing Inspection Frequency and Scope
The regulatory framework is being refined through significant rationalization measures concerning inspection frequency. Targeted inspections by SEBI have been rationalized to approximately one-third of the number performed in the preceding Financial Year for stock brokers, Depositories (DPs), Intermediaries (IAs), and Registrars (RAs). This rationalization aims to enhance the Ease of Doing Business for these entities while maintaining stringent supervision.Shifting Focus Towards Risk and Alerts
A major component of the new framework involves a complete change in how compliance is assessed. SEBI will discontinue repetitive annual comprehensive inspections of compliant entities, particularly QSBs (Qualified Stock Brokers). Instead, a dynamic risk parameter system will guide shortlisting decisions.Entities that consistently feature across various parameters or possess high 'risk scores' will be prioritized for scrutiny. Furthermore, the regulator has placed heightened emphasis on alerts generated by Exchanges, social media commentary, and customer complaints. This ensures recent instances of possible violations are given appropriate weightage during quarterly shortlisting rounds.
Advanced Inspection Methods and Collaborative Oversight
The new framework also facilitates collaborative oversight across SEBI’s departments. Inspections involving entities that hold multiple intermediary registrations will be jointly conducted by relevant SEBI departments where feasible, thereby reducing the overall volume of inspection visits throughout the financial year.Beyond routine compliance checks, inspections are now informed by detailed market intelligence and external references. This includes inputs received from Regional Offices (ROs) and Local Offices (LOs). The themes covered during these specialized inspections include technical glitches, cybersecurity incidents, and the status of Authorised Persons within stock brokers’ organizations based on received references.
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