Description

NSE introduces a framework requiring trading members to submit Action Taken Reports within 2 months of internal audit report due dates to close non-compliances, applicable from September 30, 2025 audit period onwards.

Summary

NSE has introduced a new framework for trading members to close non-compliances reported in internal audit reports through submission of Action Taken Reports (ATR). The framework requires members to close all non-compliances within 2 months from the due date of internal audit report submission. Action Taken Reports must be certified by empanelled internal auditors and submitted electronically through the Inspection module in the Member Portal. 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 on half-yearly basis (March 31 and September 30) by May 31 and November 30 respectively
  • New framework developed jointly by exchanges and SEBI to ensure timely closure of non-compliances
  • Action Taken Reports must be certified by empanelled internal auditors
  • ATR must confirm compliance status and cover at least one month period for sample verification
  • Electronic submission required through Inspection module in Member Portal under Internal Audit Tab
  • Failure to submit ATR or close observations will result in monetary penalties/disciplinary actions as per Exchange Circular No. NSE/INSP/70746 dated October 10, 2025

Regulatory Changes

The circular introduces a structured framework for closure of non-compliances reported in internal audit reports. Previously, monetary penalties and disciplinary actions were initiated directly for non-compliances. The new framework provides a grace period through the Action Taken Report mechanism, allowing members to demonstrate corrective actions taken before penalties are imposed. This aligns with SEBI Master Circular dated June 17, 2025 (Clause 13.2.4 and 13.2.5) and provides ease of doing compliance.

Compliance Requirements

For Trading Members:

  • Submit Action Taken Reports within 2 months from internal audit report due date
  • For March 31 audit period: ATR due by July 31
  • For September 30 audit period: ATR due by January 31
  • Ensure ATR is certified by empanelled internal auditor
  • Submit ATR electronically through Member Portal Inspection module
  • Close all non-compliances reported in internal audit reports within specified timelines
  • Inform internal auditors about this requirement

For Internal Auditors:

  • Certify Action Taken Reports confirming compliance status
  • Conduct sample verification covering at least one month period
  • Ensure proper documentation of corrective actions taken by trading members

Important Dates

  • Effective Date: Applicable for internal audit reports from half-year ended September 30, 2025 onwards
  • Internal Audit Report Due Dates: May 31 (for March 31 period) and November 30 (for September 30 period)
  • Action Taken Report Due Dates: July 31 (for March 31 audit period) and January 31 (for September 30 audit period)
  • Detailed Procedure Circular: To be communicated separately

Impact Assessment

Operational Impact: Trading members will need to establish robust internal processes to track and close audit non-compliances within the 2-month window. This requires enhanced coordination between compliance teams and internal auditors.

Compliance Impact: The framework provides a structured approach to resolve non-compliances before penalties are imposed, reducing the risk of disciplinary actions. Members who fail to comply will face penalties under Exchange Circular No. NSE/INSP/70746.

Process Impact: Members must adapt to the electronic submission process through the Member Portal’s Inspection module. Additional coordination with empanelled internal auditors is required for ATR certification.

Positive Aspects: The framework aligns with “Ease of Doing Compliance” initiative, providing clear timelines and procedures for closure of audit observations. It offers members an opportunity to remediate issues before penalties are imposed, promoting a more collaborative regulatory approach.

Impact Justification

Introduces new compliance framework for trading members to close internal audit non-compliances through Action Taken Reports with specific timelines, affecting operational procedures but providing ease of compliance.