Market regulator SEBI on Wednesday asked bourses to report all major non-compliances and observations by system auditors of stock brokers on a quarterly basis.
The exchanges are also required to ensure that all major audit findings specifically in critical areas, are rectified or complied in a time-bound manner.
The Securities and Exchange Board of India (SEBI) had in 2008 mandated that exchanges and depositories have to conduct an annual system audit by a reputed independent auditor.
In the audit report, exchanges need to report major non-compliance issues and other important instances of deviations, if any.
“Stock exchange should report all major non-compliances/ observations of system auditors, broker wise, on a quarterly basis to SEBI,” the regulator said in a circular.
Besides, exchanges are advised to keep track of findings of system audits of brokers on a quarterly basis and “ensure that all major audit findings, specifically in critical areas, are rectified/complied in a time bound manner failing which follow up inspection of such brokers may be taken up for necessary corrective steps thereafter, if any.”
As per SEBI, technological advancements and various market events have necessitated reviewing the existing system audit framework for stock brokers. Accordingly, system audit guidelines have been revised.
For the current year, in case the stock brokers have commenced their annual system audit, they may follow existing annual system audit framework prescribed by exchanges.
“However, stock brokers who are yet to commence annual system audit should carry out their annual system audit as per the framework given in this circular,” it added.
