Description

BSE introduces a new framework for Trading Members to submit Action Taken Reports (ATR) to close non-compliances identified in internal audit reports within 2 months of the submission due date.

Summary

BSE has introduced a new compliance framework requiring Trading Members to submit Action Taken Reports (ATR) for closing non-compliances identified in internal audit reports. The framework mandates that all non-compliances must be closed within 2 months from the internal audit report submission due date. The ATR must be certified by empanelled Internal Auditors and submitted electronically through BEFS. This framework is applicable for all internal audit reports from the half year ended September 30, 2025 onwards.

Key Points

  • Trading Members must submit internal audit reports half-yearly (by May 31 for March-end and November 30 for September-end)
  • New Action Taken Report (ATR) framework introduced in consultation with SEBI
  • ATR must be certified by empanelled Internal Auditor with at least one month sample verification period
  • Electronic submission required through BEFS (BSE Electronic Filing System) under Internal Audit Report Module
  • Monetary penalties/disciplinary actions for failure to submit ATR or close non-compliances as per Exchange notice 20251010-20
  • Framework applicable from half year ended September 30, 2025 onwards

Regulatory Changes

The Exchange, in joint consultation with SEBI, has established a structured framework for closure of non-compliances reported in internal audit reports. This builds upon existing requirements under SEBI Circular Ref. No. MIRSD/DPSIII/Cir-26/08 dated August 22, 2008 and SEBI Master Circular dated June 17, 2025 (Clause 13.2.4 and 13.2.5). The new framework shifts from direct penalty imposition to a compliance closure mechanism through Action Taken Reports, providing Trading Members an opportunity to remediate issues before penalties are applied.

Compliance Requirements

For Trading Members:

  • Close all non-compliances within 2 months from internal audit report submission due date
  • Obtain certification from empanelled Internal Auditor confirming compliance status
  • Ensure ATR covers at least one month period for sample verification
  • Submit ATR electronically through BEFS Internal Audit Report Module
  • Inform and coordinate with internal auditors regarding new requirements

Penalties for Non-Compliance:

  • Monetary penalty/disciplinary actions if observations not closed in ATR
  • Penalties if ATR not submitted within due date
  • Actions in accordance with Exchange notice 20251010-20 dated October 10, 2025

Important Dates

  • Internal Audit Report Due Dates:

    • Half year ended March 31: Due by May 31
    • Half year ended September 30: Due by November 30

  • Action Taken Report Due Dates:

    • For March 31 audit period: Due by July 31 (2 months after May 31)
    • For September 30 audit period: Due by January 31 (2 months after November 30)

  • Effective Date: Framework applicable for all internal audit reports from half year ended September 30, 2025 onwards

Impact Assessment

Operational Impact: Trading Members must establish internal processes to track, remediate, and document closure of audit non-compliances within strict 2-month timelines. This requires enhanced coordination between compliance teams and internal auditors.

Compliance Burden: While adding a new reporting requirement, the framework provides “ease of doing compliance” by creating a structured pathway to close non-compliances before penalties are imposed, potentially reducing punitive actions.

Market Impact: The framework should improve overall compliance standards among Trading Members and enhance audit effectiveness. Systematic closure of audit findings strengthens market integrity and member oversight.

Contact Information:

Impact Justification

Introduces mandatory Action Taken Report framework affecting all Trading Members with specific deadlines and penalties for non-compliance. Changes existing internal audit reporting process with immediate effect from September 2025 half-year onwards.