NSE Introduces Enhanced Guidelines for Authorized Person (AP) Inspection: What Trading Members Need to Know

June 03, 2023

The National Stock Exchange (NSE) has issued Circular Ref. No: 44/2023, dated June 02, 2023, from the Department of Member Compliance, outlining revised guidelines for the inspection of Authorized Persons (APs). These guidelines aim to enhance the effectiveness of supervision and inspection, ensuring regulatory compliance and risk management practices.

Key Highlights:

1. Scope of Inspection: The scope of AP inspection has been expanded from "Active APs" to "All Registered APs," effective from the financial year 2024-25.

2. Revised Inspection Criteria: Trading Members are required to conduct regular inspections based on the volume/turnover of registered APs. The frequency of inspection is as follows:

• Top 50% of Registered APs: Once a Year

• Subsequent Top 30% of Registered APs: Once in 18 months

• Remaining 20% of Registered APs: Once in 2 years

1. Reporting Requirements: The reporting requirement for inspections conducted by Trading Members remains as specified in Exchange circular no. NSE/COMP/50030 dated October 21, 2021.

2. Incident Reporting: Trading Members are directed to report any incidents involving assured returns or unauthorized schemes operated by APs to the Exchange within 2 working days. Necessary measures, including withdrawal of approval and alert messages to investors, should be taken as per SEBI circular MIRSD/DR-1/Cir-16/09 dated November 06, 2009.

3. Compliance Monitoring: Trading Members are advised to monitor existing and newly onboarded APs based on defined scope as outlined in Exchange circular no. NSE/INSP/42448 dated October 18, 2019. This includes various parameters such as client registration, trading activities, infrastructure, and grievance redressal mechanisms.