SEBI Conducted Lower Inspections Of Brokers, Depository Participants In FY23, BSE Led NSE In Keeping Checks

SEBI noted that in FY23, it conducted 87 inspections of stock brokers, down by about 5.4 per cent and 28 inspections of depository participants, down by 45 per cent, both on a year-on-year basis.

Along with the joint inspections, stock exchanges are mandated to conduct inspections at their individual levels according to their policy in consultation with SEBI.

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The Securities and Exchange Board of India (SEBI) conducted less inspections on stock brokers and depository participants in the fiscal year 2023 (FY23), in comparison to the previous fiscal year. The market regulator issued a circular on Monday stating that in FY23, it conducted 87 inspections of stock brokers, about 5.4 per cent lower than the previous fiscal year, and 28 inspections of depository participants, down by 45 per cent, on a year-on-year (YoY) basis.

According to a Moneycontrol report, the inspections were undertaken at a group level, indicating that trades of entities dealing in the equity segment, commodity derivative segment, and depository participant were all inspected simultaneously. The inspections were undertaken jointly with the stock exchanges and depositories to make sure that all factors involved are monitored at the same time. 

The watchdog stated in its report, “This initiative of joint inspections has minimized multiple inspections of the same entity by Sebi...during the year.” Along with the joint inspections, stock exchanges are mandated to conduct inspections at their individual levels according to their policy in consultation with SEBI.

Among the exchanges, the Bombay Stock Exchange (BSE) conducted more inspections in FY23 as compared to the National Stock Exchange (NSE). The circular noted that BSE undertook 833 inspections in FY23, an increase of 116 per cent, on a YoY basis. While, the NSE inspections in the reported year fell by 21 per cent to 431 checks, on a YoY basis. Although the NSE undertook more inspections in the fiscal year 2022 (FY22), BSE managed to take the lead in the reported year. 

The report noted that the BSE has also worked progressively on it’s derivates segment. Early in 2023, the exchange again launched Sensex and Bankex F&O contracts with smaller lot size and a Friday expiry. BSE has also seen a gradual increase in volumes for its F&O contracts and Sensex derivatives set a new record turnover of Rs 44.2 lakh crore on August 4. 

The market watchdog also informed via the circular that stock brokers are mandated to conduct internal audits on a half-yearly basis through independent auditors and stock exchanges are authorised to penalise the stock brokers for any delay in submitting the internal audit reports.