SEBI Annual Activity Report 2026: New Compliance Framework and Deadline for Market Intermediaries

The Securities and Exchange Board of India (SEBI) has introduced a revised Annual Activity Report (AAR) framework requiring all registered market intermediaries to submit comprehensive activity reports for the financial year 2025-26 by 31 May 2026. This is the first reporting cycle under the new framework, which mandates detailed disclosure of business activities, compliance status, grievance redressal metrics, investor education initiatives, and risk management practices. The AAR framework replaces the earlier fragmented reporting requirements with a unified template applicable across categories of intermediaries, including stock brokers, depository participants, mutual fund distributors, investment advisers, research analysts, portfolio managers, and merchant bankers. Non-compliance with the AAR submission deadline may attract regulatory action including show-cause notices, monetary penalties, and restrictions on business activities.

Scope and Applicability of the AAR Framework

The AAR framework applies to all entities holding a valid SEBI registration as on the last day of the reporting financial year. This includes stock brokers (including sub-brokers and authorised persons), clearing members, depository participants, merchant bankers, underwriters, debenture trustees, registrars and transfer agents, portfolio managers, investment advisers, research analysts, mutual fund distributors, credit rating agencies, and alternative investment fund managers. The scope is comprehensive and covers entities across all segments of the securities market ecosystem. For entities that hold multiple SEBI registrations, a separate AAR must be filed for each registration category. The framework recognises that different categories of intermediaries perform different functions and face different risks, and accordingly, while the core template is common, category-specific annexures are prescribed for each type of intermediary. The filing must be made electronically through the SEBI Intermediary Portal (SI Portal), and the submission must be digitally signed by the principal officer or compliance officer of the intermediary.

Key Disclosures Required in the Annual Activity Report

The AAR template requires disclosures across several categories. The first category covers business activity metrics, including the volume and value of transactions handled, number of active clients, new client additions during the year, and geographical distribution of business. For stock brokers, this includes segment-wise turnover in cash, derivatives, and commodity segments. The second category covers compliance status, requiring disclosure of all regulatory inspections conducted during the year, show-cause notices received, adjudication orders passed, consent or settlement orders, and the status of any pending regulatory proceedings. Intermediaries must also disclose any instances of non-compliance identified through internal audits and the corrective actions taken. The third category addresses investor grievance redressal, requiring disclosure of the number of complaints received, resolved, and pending at year-end, along with the average resolution time and the nature of complaints by category. The fourth category covers risk management practices, including details of the intermediary's risk management framework, internal control systems, business continuity planning arrangements, and cybersecurity measures. The fifth category requires disclosure of investor education and awareness initiatives undertaken during the year, reflecting SEBI's emphasis on investor protection as a core regulatory objective.

The CKYC 2.0 Integration: Unified KYC Reporting

The AAR framework incorporates reporting on compliance with SEBI's Central KYC (CKYC) 2.0 initiative, which aims to create a unified KYC system across the financial sector. Intermediaries are required to report the percentage of their client base whose KYC records have been uploaded to the Central KYC Registry (CKYCR) maintained by the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI). They must also report the number of KYC records updated during the year and the percentage of clients who have completed video KYC or e-KYC verification. The CKYC 2.0 integration is significant because SEBI has set aggressive timelines for achieving full CKYCR integration across all intermediary categories. The AAR serves as a monitoring tool for SEBI to track progress towards this goal and to identify intermediaries that are lagging in their KYC digitisation efforts. Non-compliance with CKYC upload requirements can be identified through AAR data and may trigger targeted inspections or enforcement action by SEBI.

Consequences of Non-Compliance

SEBI has signalled that non-compliance with the AAR submission requirement will be treated seriously. Intermediaries that fail to submit the AAR by the 31 May 2026 deadline may face a range of regulatory actions. Under the SEBI (Intermediaries) Regulations, 2008, SEBI has the power to issue warning letters, impose monetary penalties under Section 15HB of the SEBI Act 1992, suspend or cancel the registration of the intermediary, or restrict the intermediary from undertaking new business activities pending compliance. Additionally, the failure to submit accurate information in the AAR may attract liability under Section 15A of the SEBI Act, which provides for a penalty for failure to furnish information, returns, or documents that are required to be furnished to SEBI. Intermediaries should note that the AAR requires certification by the compliance officer and principal officer, making them personally accountable for the accuracy of the disclosures. Material misstatements or omissions in the AAR can attract personal liability for these individuals under the SEBI Act's enforcement framework.

Practical Steps for Compliance

With the deadline of 31 May 2026 approaching, all registered intermediaries should take immediate steps to ensure timely compliance. The first step is to access the AAR template from the SEBI SI Portal and review the category-specific annexures applicable to the intermediary's registration. The second step is to collate data across all required disclosure categories, which may require coordination between the operations, compliance, risk management, and client servicing teams within the organisation. The third step is internal review and certification, where the compliance officer reviews the completed AAR for accuracy and completeness before certification. The fourth step is electronic submission through the SI Portal with the required digital signatures. Intermediaries should plan for the submission well in advance of the deadline to allow time for data verification, internal approvals, and any technical issues with the portal. Given that this is the first cycle under the new framework, SEBI may provide clarifications or extensions if systemic issues arise with the portal. However, intermediaries should not assume that an extension will be granted and should work towards the published deadline. Maintaining comprehensive internal records throughout the year, rather than collating data only at reporting time, will make future AAR submissions more efficient and reduce the compliance burden over time.