Compliance Officer
Also written Regulation 28A compliance officer · CO
The separately appointed officer of a merchant banker, listed company or intermediary who monitors compliance with securities law, handles investor grievances, and reports non-compliance to SEBI independently.
In plain language
Every regulated firm has somebody whose job is to say no. The compliance officer is that person, and the regulations go out of their way to make sure the role cannot be quietly folded into the business.
Under Regulation 28A of the SEBI (Merchant Bankers) Regulations, a merchant banker shall always have a compliance officer. Under the LODR Regulations a listed company must appoint a full-time compliance officer. Under the ICDR Regulations an issuer making a public issue must appoint one who is responsible for monitoring compliance with the securities laws and for redressal of investors' grievances. Under the PIT Regulations the compliance officer administers the code of conduct, designates who is covered by it, and polices the Chinese Wall.
One title, four separate statutory hooks — which is exactly why the paper keeps returning to it.
How it works
Who qualifies. At the time of appointment the compliance officer of a merchant banker must be a qualified Company Secretary or hold a graduate degree in law from a recognised university, and have a minimum of two years post-qualification experience in corporate or secretarial compliance, and hold the certifications SEBI specifies. An existing compliance officer may continue either on those terms or on a professional qualification with at least five years post-qualification experience in corporate or secretarial compliance, plus the certifications.
Which certifications. Two, not one: NISM-Series-IX: Merchant Banking and NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund). An existing compliance officer had to obtain them on or before January 02, 2027; one appointed on or after January 3, 2026 must obtain them within ninety days of appointment.
Independence, stated twice. The compliance officer shall be separate and independent from the principal officer and from the professionally qualified employees required under regulation 6(b). And the code of conduct obliges the merchant banker to provide adequate freedom and powers to its compliance officer for the effective discharge of the compliance officer's duties.
What the role is answerable for. Monitoring compliance with the Act, rules, regulations, notifications, guidelines and instructions issued by SEBI or the Central Government; and redressal of investors' grievances. Beyond that, the compliance officer shall immediately and independently report to the Board any non-compliance observed, and shall ensure that observations made or deficiencies pointed out by SEBI in the draft prospectus or letter of offer do not recur.
Vacancy. If the office falls vacant, the merchant banker must appoint another compliance officer not later than three months. The vacancy may not be filled by an interim appointee unless that appointment meets the same conditions and carries the same obligations as a regular one.
Under the PIT Regulations the same officer reviews and approves or rejects a trading plan within two trading days of receipt and notifies the exchanges on the day of approval, is consulted on who the "designated persons" are, and is responsible for monitoring adherence to the Chinese Wall policy, investigating potential violations and ensuring disciplinary action.
A worked example
A Category I merchant banker has four live mandates — a Rs 1,200 crore mainboard IPO, a Rs 480 crore QIP, an open offer and a buy-back. Its compliance officer resigns on 1 June.
| Obligation | Deadline | Consequence of missing it |
|---|---|---|
| Appoint a successor | 31 August — three months | Breach of Regulation 28A |
| Interim stand-in | Allowed only if the stand-in meets the full eligibility and carries the full obligations | Parking a junior in the chair is not compliance |
| SCORES complaints arriving meanwhile | 21 calendar days each | Every missed ATR is a separate default |
The firm's first instinct — move the principal officer into the chair for the summer — is barred outright: the compliance officer must be separate and independent from the principal officer. Its second instinct — a company secretary with eighteen months of post-qualification experience — fails the two-year minimum.
The rupee exposure is not hypothetical. Where the SEBI Act provides no separate penalty for a failure, the residual penalty provision runs from not less than Rs 1,00,000 up to Rs 1,00,00,000. Against fee income on these four mandates, that is a poor trade for three months of an unfilled desk — and it is before the Rs 1,200 crore IPO has to be re-examined for whether any SEBI observation on the draft prospectus was allowed to recur.
Why NISM asks about it
Chapter 3, section 3.4 (General obligations and Responsibilities) carries Regulation 28A in full, and Chapter 2 carries the PIT and LODR versions of the role. The questions that come from it are precise: the two certifications, the two-year (or grandfathered five-year) experience requirement, the three-month vacancy window, and the two-trading-day trading plan decision.
The most frequently missed one is the reporting line: the compliance officer reports to SEBI, immediately and independently.
Common exam traps
- "The Board" in the Merchant Bankers Regulations means SEBI, not the board of directors. The compliance officer reports non-compliance to the regulator, independently — that is the entire force of the clause.
- Compliance officer and principal officer are different people, by rule. The principal officer needs five years of experience in financial markets and owns the business decisions; the compliance officer needs two years of corporate or secretarial compliance experience and owns the conscience.
- Two NISM certifications, not one — Series IX and Series III-A.
- Three months to fill a vacancy, and an interim appointee must meet the full conditions. There is no "acting compliance officer" shortcut.
- The trading plan decision is two trading days, and the exchanges must be notified on the day of approval.
- Ensuring SEBI's draft-prospectus observations do not recur is a standing duty across future issues, not a one-off fix on the issue where the observation arose.
Where this is taught
- Series V-B · Chapter 3: Legal Structure of mutual fundsintroduced here
- Series IX · Chapter 3: Registration, Code of Conduct & General Obligations of Merchant Bankers in Indiaintroduced here
- Series III-C · Chapter 3: Introduction to Complianceintroduced here
- Series V-D · Chapter 3: Legal Structure of Mutual Funds in Indiaintroduced here
- Series VI · Chapter 3: Depository and its business partnersintroduced here
- Series V-A · Chapter 3: Legal Structure of Mutual Funds in Indiaintroduced here
- Series III-A · Chapter 3: Introduction to Complianceintroduced here
- Series XIX-C · Chapter 15: Fund Monitoring, Reporting and Exitintroduced here
Related terms
- Chinese WallAn enforced separation inside a firm between departments holding confidential price-sensitive information and those dealing with clients, sales or public research.
- SCORESSEBI's centralised web-based system for processing investor complaints, on which the company or intermediary must upload an Action Taken Report and the investor can watch the status online.
- Principal officerThe named individual at a non-individual intermediary who carries personal regulatory responsibility for the advisory business, and who must personally hold the prescribed qualification and NISM certification.
- Structured digital databaseThe tamper-evident internal register every handler of unpublished price sensitive information must maintain, recording the nature of the information and the PAN of everyone who shared it and received it.
- Trading planA plan an insider may formulate under Regulation 5, starting no earlier than 120 calendar days after public disclosure, avoiding the results blackout, running at least twelve months, specifying quantity, nature, a…
- Merchant bankerA SEBI-registered body corporate engaged in the business of issue management — arranging the selling, buying or subscribing of securities, or acting as manager, consultant or adviser in relation to an issue.
- Liquid Net WorthThe part of a merchant banker's net worth deployed in unencumbered liquid assets, counted after a prescribed haircut on each asset type — a second capital test that net worth alone cannot satisfy.
- Securities Appellate TribunalThe statutory tribunal established under the SEBI Act that hears appeals from orders of SEBI and of its adjudicating officers, which must be filed within 45 days of receipt of the order.
- Immediate relativeA spouse, plus any parent, sibling or child of the person or of the spouse who is either financially dependent on them or consults them on securities trading decisions.
- Trading plans — regulation 5A pre-announced, irrevocable schedule of trades an insider files with the compliance officer, which may not begin for 120 calendar days and then executes without pre-clearance or trading window limits.
- InformantAn individual who voluntarily files a Voluntary Information Disclosure Form with SEBI about an alleged insider trading violation — protected from retaliation, and an informant whether or not any reward follows.
- Fit and proper person criteriaThe continuing character and capability test for a SEBI intermediary, its key people and its 20%-plus owners — eleven disqualifications, any one of which is enough to fail it.
- Designated personsThe people a listed company, intermediary or fiduciary formally names as subject to its insider trading code of conduct, chosen by the access their role gives to price sensitive information.
- Restricted listThe confidential list of securities an intermediary's compliance officer maintains, used as the basis for approving or rejecting applications for pre-clearance of trades by designated persons.
- Persons associated with investment adviceAny member, partner, officer, director, employee or sales staff of an investment adviser who is engaged in providing investment advisory services to the adviser's clients.
- Stewardship codeSEBI's mandatory code requiring all AIFs and mutual funds to monitor, engage with and vote in the listed companies they invest in — and to publish the policies by which they do it.
- Compliance Test ReportThe annual self-certification an AIF manager prepares in SEBI's prescribed format, testing the fund against the AIF Regulations and routed through the sponsor and trustee for comment.