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-A · Chapter 3: Legal Structure of Mutual Funds in Indiaintroduced here
- Series XXI-B · Chapter 7: Role of Portfolio Managersintroduced here
- Series IX · Chapter 3: Registration, Code of Conduct & General Obligations of Merchant Bankers in Indiaintroduced here
- Series III-A · Chapter 3: Introduction to Complianceintroduced here
- Series VI · Chapter 3: Depository and its business partnersintroduced here
- Series V-D · Chapter 3: Legal Structure of Mutual Funds in Indiaintroduced here
- Series XIX-C · Chapter 15: Fund Monitoring, Reporting and Exitintroduced here
- Series V-B · Chapter 3: Legal Structure of mutual fundsintroduced here
- Series XXI-A · Chapter 7: Role of Portfolio Managersintroduced here
- Series XIX-E · Chapter 13: Fund Monitoring, Reporting and Exitintroduced here
- Series III-C · Chapter 3: Introduction to Complianceintroduced 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.
- 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.
- 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.
- Body corporateAn entity with a legal existence separate from the persons forming it, as defined in Section 2(11) of the Companies Act, 2013. Only a body corporate can register with SEBI as a portfolio manager.
- 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.
- Strategic Business UnitThe ring-fenced unit through which a merchant banker may carry on fee-based, non-fund-based activities SEBI does not regulate, with the segregation due on or before December 31, 2026.
- Document Repository platformAn online platform set up by the stock exchanges on which merchant bankers upload and maintain electronically the documents they relied upon while conducting due diligence in a public issue.
- Misleading advertisementAn issue advertisement that states the issuer's performance without the necessary qualifying statements, or portrays past performance inaccurately or as if past gains will be repeated in future.
- Conflict of Interest PolicyThe written policy every AIF must have describing the conflicts that could arise at each level of the fund, how the manager will mitigate them, and how investors are told and asked to acknowledge them.
- Intimation to SEBI modelThe PPM filing route for AI-only Funds and LVFs: filed directly with SEBI without a merchant banker or SEBI comments, so schemes can launch immediately on filing (a first scheme only once registered).
- Working daysFor AIF filings and reporting, all days excluding Saturdays, Sundays and public holidays on which the concerned SEBI office is closed for business, as published on SEBI's website.
- Conflict of Interest RegisterThe record an AIF keeps of each actual or potential conflict of interest — naming the related party, the nature of the relationship, the date it arose, the proposed investment and its market price.
- Ring-fencing of schemesThe duty on an AIF's manager and trustee to keep each scheme's assets, liabilities, bank accounts and securities accounts segregated from every other scheme of the same fund.
- Unified RegistrationThe single SEBI certificate, under the RTA Regulations, 2025, that lets one entity act both as Registrar to an Issue and as Share Transfer Agent — replacing the old category-wise registration.
- Material subsidiaryUnder SEBI's LODR Regulations, a subsidiary whose income or net worth exceeds 10 percent of the listed group's consolidated income or net worth in the immediately preceding accounting year.
- 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.
- 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.
- Registrar of CompaniesThe office, appointed by the Central Government under section 396 of the Companies Act, 2013, that registers companies, keeps their public records and charges, and polices their statutory filings.
- 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.
- ComplianceThe set of actions by which securities market intermediaries and issuers conform to the rules of SEBI, the exchanges, the depositories and their own boards — records, policies, reports and submissions.
- Dual reporting lineThe compliance officer's two reporting duties — to the board of the entity that appointed him, and, for any non-compliance of the SEBI Act or regulations, immediately and independently to SEBI.
- Unauthenticated news guidelinesSEBI's guidelines requiring intermediaries to control staff access to blogs and chat forums, keep logs of that access, and route market-related news staff receive through the Compliance Officer first.
- 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.
- Dealing teamThe team a portfolio manager must constitute to place and execute all orders under its written policies, working from a restricted dealing room with recorded lines and full audit trails.
- Online Dispute ResolutionThe MII-administered process — pre-conciliation, conciliation, then arbitration — through which investor disputes with portfolio managers are resolved online via the SMART ODR portal.
- Pre-clearancePrior approval from the compliance officer before a designated person trades above a board-set threshold. A pre-cleared trade must be executed within at most seven trading days.
- Material financial relationshipA relationship where a person received payments such as loans or gifts from a designated person in the last 12 months worth at least 25% of that designated person's annual income, excluding arm's length deals.
- Weighted average priceTotal cost of a day's aggregated purchases (or sales) divided by total quantity — the price at which a portfolio manager must allocate aggregated trades to clients, pro rata.
- Pool executionA PMS execution model: trading for all clients together and then allocating securities to each client's demat account — as opposed to trading in each client's own name.
- Investor Protection and Education FundThe fund SEBI administers under the SEBI Act, credited with profits disgorged after a banned contra trade and with monetary sanctions collected under a firm's own code of conduct.