Securities Intermediaries Compliance (Non-Fund)
This domain covers the compliance function inside SEBI-registered intermediaries that are not mutual funds - stock brokers, depository participants, merchant bankers, portfolio managers, registrars, investment advisers and research analysts. The exam tests whether you can match each obligation to its regulation and apply it to a real breach.
The regulatory spine
- SEBI Act, 1992: registration and enforcement powers; the SEBI (Intermediaries) Regulations, 2008 carry registration conditions, general obligations and the code of conduct in Schedule III.
- Product rules layer on top: Stock Brokers Regulations 2021; Depositories and Participants Regulations 2018; Portfolio Managers Regulations 2020; Investment Advisers Regulations 2013; Research Analysts Regulations 2014; PIT Regulations 2015.
- Anti-money-laundering duties come from the PMLA, 2002: principal officer, designated director, client due diligence, and suspicious transaction reports to FIU-IND.
- Records of clients and transactions: at least five years; KYC centralised through KYC Registration Agencies.
Compliance officer in practice
Monitor adherence to the code of conduct, resolve investor complaints on SCORES within 30 days, keep client funds and securities fully segregated from the intermediary's own, settle running accounts at least monthly unless the client opts for quarterly, and face SEBI inspections and internal audits.
Worked example
A dealer buys scrip X two days before a large institutional order crosses his desk, and a new client's account is funded by a third party. Front-running indicator: information about the pending order is unpublished price-sensitive information, so preserve order logs and call records, escalate to the designated director, and assess a PIT report. Third-party funding: client due diligence fails under PMLA - freeze the account and file an STR with FIU-IND if suspicion is established. Segregate the desk's order flow while investigating.
Traps
- Mixing the SEBI (Intermediaries) Regulations 2008 (registration, code of conduct) with PIT Regulations 2015 (insider trading) and PMLA (AML).
- Treating the compliance officer as a reporting clerk rather than a monitor with grievance-redressal duties.
- Forgetting the specifics: 30-day SCORES resolution, five-year retention, no commingling of client funds.