Market regulator Sebi has streamlined inspection of market intermediaries by mandating joint inspections by stock exchanges and depositories and reducing its inspection target for FY27 to about one-third of the previous year's level. According to Sebi's statement, the revamped inspection framework, which follows consultations with Market Infrastructure Institutions (MIIs) and the Supervisory Body for Investment Advisers (IAs) and Research Analysts (RAs), will be implemented from the financial year 2026-27. The regulator stated that considering the regular inspections of stock brokers, DPs, IAs and RAs done by stock exchanges and depositories, the targeted number of inspections to be carried out by Sebi in the Financial Year 2026-27 has been rationalized to approximately one-third of the inspections conducted in the preceding financial year. As per Mint, the measures are intended to collectively enhance Ease of Doing Business of the intermediaries, as a result of the rationalisation in the frequency of inspection visits.
The revised framework aims to strengthen regulatory oversight through a dynamic risk-based approach while enhancing ease of doing business for intermediaries by reducing the frequency of inspection visits. As reported by Sebi, the regulator has decided to discontinue repetitive annual comprehensive inspections of compliant entities, particularly Qualified Stock Brokers (QSBs). However, entities that repeatedly feature across risk parameters, carry high risk scores, or trigger multiple alerts generated by exchanges will continue to receive priority for inspections. The regulator will place greater emphasis on alerts generated by exchanges, investor complaints and social media inputs to identify potential violations, with shortlisting of entities for inspections now undertaken on a quarterly basis. According to Mint, the overhaul marks a shift from blanket annual inspections towards a dynamic risk-based model, with the regulator having expanded the set of risk indicators used to identify entities for inspection and increased weight assigned to recent alerts from stock exchanges, investor complaints and social media inputs.
According to Sebi's annual report released on Thursday, during 2025-26, Sebi and exchanges conducted 179 inspections (162 thematic and 17 comprehensive) of 106 brokers. Independently, exchanges completed 973 inspections of 822 brokers across various market segments. Additionally, Sebi and depositories conducted 28 joint inspections of 23 depository participants, while depositories executed 617 inspections of 583 depository participants to safeguard securities holding systems. The regulator noted that inspections of entities holding multiple intermediary registrations will be conducted jointly by different Sebi departments, wherever feasible, to minimize multiple inspection visits during the year. As per Mint, to further reduce compliance costs, it will also conduct joint inspections of entities holding multiple intermediary registrations wherever feasible, with such inspections involving various Sebi departments coordinating their supervisory activities, reducing the number of visits made to the same entity during a financial year.
Sebi will initiate inspections based on market intelligence and references received from its regional and local offices, covering issues such as technical glitches, cyber incidents and matters relating to authorized persons of stock brokers. As reported by Sebi, these initiatives are intended to strengthen supervision while making the compliance process more efficient and less burdensome for market intermediaries. The framework represents a significant shift toward coordinated regulatory oversight while maintaining effective market surveillance capabilities. The changes mark a shift from routine inspection to risk-based supervision, with the regulator giving greater weight to alerts generated by exchanges, investor complaints and social media inputs while assigning priority to recent possible violations.
