Description

BSE requires all trading members to submit their internal audit reports for the half year ended March 31, 2026 via BEFS portal, with updated sampling criteria and new compliance verification requirements.

Summary

BSE has directed all trading members to complete and submit their internal audit reports for the half year ended March 31, 2026 electronically through the BEFS (BSE Electronic Filing System) member portal. The audit must be conducted by an empanelled auditor as per the framework established in prior Exchange notices. Several key changes have been introduced in sampling criteria, non-compliance reporting, and scope expansion compared to the previous half year.

Key Points

  • All trading members must submit internal audit reports for H2 FY2026 (half year ended March 31, 2026) via the BEFS member portal
  • Only reports certified by empanelled auditors will be accepted for this period
  • Revised sampling criterion and methodology for sample selection compared to the previous half year (refer Annexure III and III A)
  • For each “Not complied” observation, auditors must mandatorily provide the number of instances verified, instances of non-compliance, and amount/value involved
  • Internal auditors must verify compliance with SEBI Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016, on appointment and rotation of internal auditors
  • If SEBI conducted an inspection and issued corrective measures, auditor must verify submission of Compliance Status Report and submit Annexure VI to enforcement@bseindia.com
  • The Internal Audit Report is considered complete only after submission of Annexure VI (where applicable)
  • For exchange action letters issued April 2025 to September 2025 for material non-compliances, auditors must select samples as prescribed in Annexure III A

Regulatory Changes

  • Effective from half year ended March 31, 2026, certain information previously submitted under Risk Based Supervision (RBS) is now required to be submitted within the Internal Audit Report:
    • Details of subsidiaries/branches/representative offices in other countries and regulatory approvals
    • Number of non-compliance instances and SEBI penalties during the assessment period related to fraud, including nature of fraud, amounts, whether client or member assets were involved, and actions taken against employees/APs
    • Further inspection-related details (content truncated in source)
  • Updated empanelment framework references: Exchange Notice No. 20231003-61 (Oct 3, 2023), No. 20231215-55 (Dec 15, 2023), and No. 20240304-60 (Mar 4, 2024)

Compliance Requirements

  • Trading Members: Complete internal audit for H2 FY2026 and submit electronically via BEFS portal
  • Internal Auditors: Must be empanelled as per the Exchange’s framework; review revised Annexure III and III A before initiating audit
  • Non-compliance reporting: Mandatory quantitative details (instances verified, non-compliances, amounts) for every “Not complied” observation
  • SEBI inspection cases: Auditor must verify Compliance Status Report submission and file Annexure VI to enforcement@bseindia.com
  • Material non-compliances: Use Annexure III A sampling for cases where action letters were issued April–September 2025
  • RBS migration: Report new disclosures (foreign offices, fraud penalties, inspection details) within the audit report instead of RBS

Important Dates

  • Audit period: Half year ended March 31, 2026
  • Reference notices: Exchange Notice 20231003-61 (Oct 3, 2023), 20231215-55 (Dec 15, 2023), 20240304-60 (Mar 4, 2024), 20250625-1 (Jun 25, 2025)
  • Notice date: April 7, 2026
  • Submission deadline not explicitly stated in the circular; members should refer to BEFS portal for deadline

Impact Assessment

This circular has high operational impact on all BSE trading members and their appointed internal auditors. The expanded scope — absorbing certain RBS disclosures into the audit report — increases the audit workload and requires auditors to gather additional data points around foreign offices and SEBI penalties. The mandatory quantitative reporting for non-compliances raises the bar for audit quality and documentation. The requirement that reports be certified only by empanelled auditors limits flexibility and requires members to confirm their auditor’s empanelment status before commencing the audit. Non-submission or incomplete submission (e.g., missing Annexure VI where applicable) will render the report incomplete, potentially exposing members to regulatory action.

Impact Justification

Mandatory compliance requirement for all trading members with updated audit framework, new sampling methodology, and expanded scope including previously RBS-reported disclosures.