SEBI ups ante on inspections on market intermediaries | The Financial Express

SEBI ups ante on inspections on market intermediaries

During the year, 92 brokers, 51 depository participants and four clearing members were inspected. Inspections of stock brokers and DPs were carried out at a group level along with joint inspections with the exchanges.

SEBI ups ante on inspections on market intermediaries
During 2021-22, Sebi carried out comprehensive inspections of NSE, BSE and MSEI. (File)

Sebi has increased its oversight on alternative investment funds, portfolio managers and market infrastructure institutions by way of inspections.

The number of inspections on AIFs and portfolio managers for 2021-22 stood at 13 and 12, respectively, Sebi’s annual report for FY22 showed. This compares with a total of 3 inspections conducted for these segments in the previous fiscal. Inspections on foreign venture capital investors doubled to 21 from 10 in the previous fiscal. Inspections on stock brokers by the BSE and NSE rose to 931 in FY22, up 39% over the previous year.

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“As part of its data detectives strategy, Sebi will continue to invest in automation of surveillance, investigation and inspection in order to build robust, agile and scalable capabilities using artificial intelligence and machine learning techniques to ensure fairness and orderly functioning of the markets. As part of SupTech initiatives, numerous new algorithms have been developed by the market surveillance team and mutual fund inspection team. These initiatives will be taken forwards and replicated across other domains of the market,” Sebi chairperson Madhabi Puri Buch said in a note in the annual report.

During 2021-22, Sebi carried out comprehensive inspections of NSE, BSE and MSEI. On-site inspections of the surveillance function of BSE, MSEI, MCX, NCDEX and commodity derivatives segment of NSE commenced during the year. Off-site inspection of CDSL, MCCL and NSE Clearing, on-site inspection of NSDL and inspection of ICCL were initiated during the year. On-site inspection of the surveillance function of CDSL and NSDL were completed, after which observations and suggestions were made along with an administrative warning.

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During the year, 92 brokers, 51 depository participants and four clearing members were inspected. Inspections of stock brokers and DPs were carried out at a group level along with joint inspections with the exchanges.

“The nature of these inspections were comprehensive with due emphasis on compliance of specific provisions of Sebi circulars. Themes such as handling of funds and securities of clients, timely settlement of accounts, segregation of client and proprietary funds, pledging of securities, KYC norms were taken up for supervision,” Sebi said in its annual report.

Inspection of 23 mutual funds and its respective RTA operations were initiated. Investor education fund aggregated by mutual funds with AMFI was initiated during the year. Adjudicating proceedings against three mutual funds were initiated while 13 warning letters and two deficiency letters were issued.

“A risk-based inspection policy has been adopted by Sebi for inspection of mutual funds. The inspections are based on risk (liquidity, credit, technological) and impact (retail AUM, total AUM) parameters,” Sebi said. 

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First published on: 11-10-2022 at 04:30 IST