Description

BSE introduces new framework requiring Trading Members to submit Action Taken Reports for internal audit non-compliances within 2 months, with electronic submission through BEFS system.

Summary

BSE has introduced a new framework for closure of non-compliances reported in Internal Audit Reports through submission of Action Taken Reports (ATR). Trading Members must now close all internal audit non-compliances within 2 months from the due date of Internal Audit Report submission through electronic filing in the BEFS system. The ATR must be certified by empanelled Internal Auditors and failure to comply will result in monetary penalties and disciplinary actions. This framework is applicable from the half year ended September 30, 2025 onwards.

Key Points

  • Trading Members must submit Action Taken Reports for all non-compliances reported in internal audit reports
  • ATR due dates: July 31 for March 31 period and January 31 for September 30 period (2 months from internal audit submission deadline)
  • Action Taken Report must be certified by empanelled Internal Auditor of the Trading Member
  • Certification must confirm compliance status and cover at least one month period for sample verification
  • Electronic submission mandatory through BEFS (BSE Electronic Filing System) under Internal Audit Report Module
  • Non-compliance or delayed submission will attract monetary penalties/disciplinary actions as per Exchange notice no. 20251010-20 dated October 10, 2025
  • Framework developed jointly by Exchanges in consultation with SEBI

Regulatory Changes

This circular introduces a structured framework for timely closure of internal audit non-compliances, building upon existing requirements under:

  • SEBI Circular Ref. No. MIRSD/DPSIII/Cir-26/08 dated August 22, 2008 (half-yearly internal audit submission)
  • Clause 13.2.4 and Clause 13.2.5 of SEBI Master Circular dated June 17, 2025

The new framework shifts from reactive penalty approach to proactive compliance closure mechanism with defined timelines and structured reporting through electronic systems.

Compliance Requirements

For Trading Members:

  • Close all non-compliances reported in internal audit reports within 2 months from due date of internal audit submission
  • Obtain certification from empanelled Internal Auditor confirming compliance status
  • Ensure Internal Auditor conducts sample verification covering at least one month period
  • Submit Action Taken Report electronically through BEFS system
  • Notify internal auditors of new requirements
  • Ensure timely compliance to avoid penalties

For Internal Auditors:

  • Certify Action Taken Reports submitted by Trading Members
  • Verify compliance status through sample verification covering minimum one month period
  • Confirm closure of non-compliances reported in audit reports

Important Dates

  • Effective Date: Applicable for all internal audit reports from half year ended September 30, 2025 onwards
  • ATR Submission Deadline for March 31 period: July 31
  • ATR Submission Deadline for September 30 period: January 31
  • Internal Audit Report Deadlines (existing): May 31 for March 31 period, November 30 for September 30 period
  • Detailed BEFS procedure: To be communicated through separate circular

Impact Assessment

Operational Impact:

  • Trading Members must establish internal processes for tracking and closing audit non-compliances within strict 2-month timelines
  • Requires enhanced coordination between Trading Members and empanelled Internal Auditors
  • Need for familiarity with BEFS electronic filing system for ATR submission
  • Additional administrative burden of obtaining auditor certification for closure

Compliance Impact:

  • Positive step towards “Ease of Doing Compliance” by providing structured framework
  • Clear timelines reduce ambiguity in compliance closure expectations
  • Potential for penalties if non-compliances not closed within deadline or ATR not submitted
  • Enhanced regulatory oversight through mandatory electronic tracking

Contact Information for Queries:

Impact Justification

Mandatory new compliance framework affecting all Trading Members with strict timelines and penalties for non-compliance, requiring significant operational changes