Description

BSE introduces a new framework requiring Trading Members to submit Action Taken Reports within 2 months to close non-compliances reported in Internal Audit Reports, effective from September 30, 2025 onwards.

Summary

BSE has introduced a new framework for Trading Members to close non-compliances reported in Internal Audit Reports through submission of Action Taken Reports (ATR). Trading Members must submit ATRs within 2 months from the due date of Internal Audit Report submission, certified by empanelled Internal Auditors. The framework is applicable for all internal audit reports from the half year ended September 30, 2025 onwards. Failure to submit ATR or close observations will result in monetary penalties or disciplinary actions as per Exchange notice no. 20251010-20 dated October 10, 2025.

Key Points

  • Trading Members must submit internal audit reports on a half-yearly basis (March 31 and September 30) by May 31 and November 30 respectively
  • New framework developed jointly by Exchanges and SEBI for timely closure of non-compliances
  • Action Taken Reports must be submitted within 2 months from the end of due date of Internal Audit Report submission
  • ATR must be certified by empanelled Internal Auditor confirming compliance status
  • Certification must cover at least one month period for sample verification
  • ATRs to be submitted electronically through BEFS (BSE Electronic Filing System) under Internal Audit Report Module
  • Monetary penalties/disciplinary actions will be initiated for non-submission or non-closure of observations
  • Framework replaces current practice of initiating penalties directly for non-compliances reported in audit reports

Regulatory Changes

The circular introduces a structured framework for closure of internal audit non-compliances through Action Taken Reports, moving from direct penalty initiation to a compliance closure mechanism. This framework is implemented in accordance with Clause 13.2.4 and Clause 13.2.5 of SEBI Master Circular dated June 17, 2025, and based on joint consultation between Exchanges and SEBI. The new process aims to provide ease of doing compliance while ensuring timely remediation of audit findings.

Compliance Requirements

For Trading Members:

  • Submit internal audit reports half-yearly as per existing SEBI Circular Ref. No. MIRSD/DPSIII/Cir-26/08 dated August 22, 2008
  • Close all non-compliances reported in internal audit reports within prescribed timelines
  • Submit Action Taken Reports electronically through BEFS system
  • Coordinate with empanelled Internal Auditors for ATR certification
  • Notify internal auditors of these new requirements

For Internal Auditors:

  • Certify Action Taken Reports confirming compliance status
  • Conduct sample verification covering at least one month period
  • Coordinate with Trading Members for timely ATR submission

Submission Process:

  • Use BEFS (BSE Electronic Filing System) Internal Audit Report Module
  • Detailed procedure to be communicated through separate circular

Important Dates

Internal Audit Report Submission:

  • For half year ending March 31: Due by May 31
  • For half year ending September 30: Due by November 30

Action Taken Report Submission:

  • For Internal Audit Period ended March 31: Due by July 31 (2 months after May 31)
  • For Internal Audit Period ended September 30: 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 will need to establish internal processes for timely closure of audit non-compliances within the 2-month window. This requires enhanced coordination between compliance teams and internal auditors, potentially increasing operational workload during ATR preparation periods.

Compliance Impact: The framework provides a structured pathway to address non-compliances before penalties are imposed, offering Trading Members opportunity to remediate issues proactively. However, failure to meet ATR deadlines will trigger penalties as per Exchange notice no. 20251010-20.

Process Impact: Introduction of electronic ATR submission through BEFS streamlines the reporting process and provides better tracking mechanism for both Exchange and Trading Members. Members will need to familiarize themselves with the new BEFS module and procedures.

Support Contact Details:

Impact Justification

Introduces mandatory Action Taken Report framework with strict timelines and penalties for all Trading Members, significantly impacting compliance processes and requiring coordination with internal auditors.