Executive Summary:
This circular, issued by SEBI on August 7, 2025, outlines a new Ease of Doing Business (EODB) policy for joint annual inspections of intermediaries by Market Infrastructure Institutions (MIIs). It replaces previous guidelines to reduce the burden on intermediaries through joint inspections, an information-sharing mechanism, and revised selection criteria. MIIs must frame a joint Standard Operating Procedure (SOP) by November 1, 2025, and the provisions of this circular will be effective from December 1, 2025.
Key Points / Main Content:
Joint Annual Inspections:
* Annual inspections of stock brokers/depository participants (DPs) will be conducted jointly by all relevant MIIs (Stock Exchanges, Depositories, and Clearing Corporations).
* DP operations and clearing activities undertaken by entities will be inspected by Depositories and Clearing Corporations, respectively.
Information Sharing Mechanism:
* MIIs will establish a mechanism to share inspection observations of entities holding multiple registrations.
Rationalization of Selection Criteria:
* Revised criteria for annual inspection include:
* Top 25 entities paying high/recurring penalties for non-reporting, short reporting of margin, client code modification, CTCL mismatch fines, or similar high-risk compliance issues.
* Top 25 entities based on investor complaints and arbitration cases (as a percentage of active clients).
* Top 25 entities based on High risk score under Risk Based Supervision.
* Entities not falling under the above categories will be inspected at least once every three years.
* Entities inspected in the preceding two years by any of the MIIs/SEBI or entities with no trade in the last two financial years may not be considered for inspection.
* Professional Clearing Members will be inspected jointly by Clearing Corporations once every two years.
Special Purpose Inspections:
* MIIs retain the right to conduct special/limited inspections based on specific triggers, irrespective of previous inspection timelines.
Standard Operating Procedure (SOP):
* MIIs must create a joint SOP by November 1, 2025, detailing inspection criteria, information sharing, and the designation of a Lead MII to initiate enforcement action.
Policy Review:
* MIIs should continuously review and revise the annual inspection policy in consultation with SEBI.
Qualified Stock Brokers (QSBs):
* QSBs will continue to be governed by SEBI circular on Enhanced obligations and responsibilities on QSBs dated February 06, 2023.
Circular Rescission and Amendment:
* SEBI Circular CIRHOMIRSDMIRSD2CIRP201773 dated June 30, 2017, is rescinded.
* Para 14 of Master Circular for Stock Brokers dated June 17, 2025, is amended as per this circular.
Effective Date:
* The provisions of this circular are effective from December 1, 2025.
Amendments to Byelaws:
* MIIs must amend relevant byelaws, rules, and regulations to implement these directions.
Impact Analysis:
Market Infrastructure Institutions (MIIs):
Impact: MIIs are required to conduct joint inspections, share information, revise selection criteria, and frame a joint SOP.
Action Required: MIIs must establish an information sharing mechanism, revise their inspection criteria, frame a joint SOP by November 1, 2025, amend their byelaws, rules, and regulations, and continuously review the policy.
Stock Brokers, Depository Participants, Clearing Members:
Impact: These intermediaries will undergo joint annual inspections instead of separate inspections by each MII, reducing the frequency of inspections.
Action Required: Intermediaries should be prepared for joint inspections by all relevant MIIs and ensure compliance with the revised inspection criteria.
Investors:
Impact: Enhanced supervision and a comprehensive view of entity operations across all MIIs, with the aim of protecting their interests in securities and promoting the development of securities markets.
Action Required: No direct action required.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): Regulatory body for securities markets in India, responsible for protecting investor interests and regulating the securities market.
Market Infrastructure Institutions (MIIs): Entities such as Stock Exchanges, Depositories, and Clearing Corporations that form the infrastructure for the securities market.
Stock Exchanges: Organizations that provide a platform for trading in securities.
Depositories: Organizations that hold securities in electronic form.
Clearing Corporations: Organizations that facilitate the clearing and settlement of securities transactions.
Depositories Act, 1996: An act of the Indian Parliament to provide for the establishment of depositories in securities with the objective of promoting the growth of the securities market.
Securities and Exchange Board of India Act, 1992: An act of the Indian Parliament establishing the Securities and Exchange Board of India (SEBI) and conferring powers upon it.
Securities Contracts Regulation Stock Exchanges and Clearing Corporations Regulations, 2018: Regulations pertaining to the regulation of stock exchanges and clearing corporations.
CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/113 August 07, 2025
To,
All recognized Stock Exchanges
All Depositories
All Clearing Corporations
Madam / Sir,
Sub: Ease of doing business (EODB) - Policy for joint annual inspection by MIIs
– information sharing mechanism– action by Lead MII
1. SEBI vide circular CIR/HO/MIRSD/MIRSD2/CIR/P/2017/73 dated June 30,
2017(hereinafter mentioned as ‘Circular’) and para 14 of Master Circular for stock
brokers dated June 17, 2025 (hereinafter mentioned as ‘Master Circular’), specified
provisions pertaining to policy for annual inspection of members.
2. Presently, annual inspection of stock brokers/ depository participants
(‘Brokers’/DPs) are conducted by each of the MIIs (Stock
Exchanges/Depositories/Clearing Corporations) separately. 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.
3. Accordingly, in order to ensure ease of doing business and to take comprehensive
view of entity’s operations across all MIIs along with optimum utilization of
resources, the following has been decided
I. Joint annual inspection instead of separate inspections by MIIs:
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
Page 1 of 4undertaking clearing for other brokers). DP operations and clearing activity
undertaken by entities shall be inspected by Depositories and Clearing
Corporations, respectively.
This will ensure that entities selected by MIIs for their annual inspection shall
be inspected jointly by all MIIs at one time.
II. Information sharing mechanism:
In order to improve the effectiveness of supervision, MIIs shall establish an
information sharing mechanism with one another for sharing of inspection
observations of entities who hold multiple registrations with MIIs.
III. Rationalization and streamlining of criteria for selection of entities:
i. It has been decided to revise the criteria for annual inspection as follows:
a. Top 25 entities paying high and recurring penalties for non-reporting or
short reporting of margin/Client Code modification/CTCL mismatch
fines or any other similar high risk compliance issue - shall be
inspected irrespective of when they were last inspected.
b. Top 25 entities in terms of investor complaints and arbitration cases
filed by investors, as percentage of number of active clients shall be
inspected irrespective of the fact of when they were last inspected.
c. Top 25 entities based on ‘High risk score’ under Risk Based
Supervision.
ii. Entities that do not fall under any of the above categories shall be inspected
by the MIIs at least once in three years.
iii. However, 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.
iv. Irrespective of the above, inspections of Professional Clearing Members
shall be conducted jointly by Clearing Corporations once in two years.
Page 2 of 44. Notwithstanding the above, MIIs shall have the prerogative to carry out special
purpose/limited inspections based on any triggers like patterns found during
investor complaint resolution/Arbitration, complaints on specific malpractices of a
broker or references from various authorities. The inspection shall be irrespective
of the fact of when the last inspection was carried out.
5. MIIs are advised to frame a joint Standard Operating Procedure (SOP) by
November 01, 2025 for detailed specifications of inspection criteria, information
sharing mechanism and designating one MII as a ‘Lead MII’, which will initiate
enforcement action for such inspections.
6. MIIs are advised to continuously review the policy of annual inspection and revise,
as and when required, in consultation with SEBI.
7. Qualified Stock Brokers (QSBs) shall continue to be governed by SEBI circular on
‘Enhanced obligations and responsibilities on QSBs’ dated February 06, 2023 and
any changes issued from time to time by SEBI/exchanges.
8. With the issuance of this circular, SEBI Circular
CIR/HO/MIRSD/MIRSD2/CIR/P/2017/73 dated June 30, 2017 stands rescinded
and para 14 of Master Circular for Stock Brokers dated June 17, 2025 stands
amended as per this circular.
9. The provisions of this circular shall come into force with effect from December 01,
2025.
10. MIIs are directed to make amendments to the relevant bye-laws, rules and
regulations for the implementation of above directions.
11. This circular is issued in exercise of powers conferred under Section 11(1) of
Chapter IV of the Securities and Exchange Board of India Act, 1992, and Section
19 of Chapter IV of the Depositories Act, 1996 read with Regulation 51 of Securities
Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations,
2018 to protect the interests of investors in securities and to promote the
development of, and to regulate the securities markets.
Page 3 of 412. This circular is available on SEBI website at www.sebi.gov.in under the
category: ‘Legal → Circulars’.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No: 022 26449633
aradhanad@sebi.gov.in
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