Description

NSE circular providing the format for auditor's certificate (Annexure VIII) to certify compliance status on corrective actions taken by Trading Members based on SEBI inspection findings.

Summary

NSE has issued a circular prescribing the format for Annexure VIII — an auditor’s compliance certificate to be issued by empanelled auditors on their letterhead. This certificate is required to verify and certify corrective actions taken by Trading Members following findings identified during SEBI inspections. The circular also includes an Internal Audit Report (IAR) template in spreadsheet form.

Key Points

  • Auditors must issue the compliance certificate on their firm’s letterhead as per the prescribed Annexure VIII format
  • The certificate covers all trading segments: Capital Market (CM), Futures & Options (FO), Currency Derivatives (CD), and Commodity
  • Auditors must confirm examination of books of accounts, records, and documents of the Trading Member
  • Certificate must declare that the audit firm meets NSE’s eligibility criteria for empanelled auditors
  • Auditors must declare the absence of any direct or indirect conflict of interest with the Trading Member
  • Compliance status for each SEBI observation must be reported as either ‘Complied’ or ‘Not complied’ in Annexure A
  • An Internal Audit Report (IAR) template (IARNSEMAR26.xlsx) is provided as a structured checklist

Regulatory Changes

No new regulatory requirements introduced. The circular standardises the format (Annexure VIII) for compliance certificates submitted by empanelled auditors post-SEBI inspection, ensuring uniformity across Trading Members.

Compliance Requirements

  • Trading Members subject to SEBI inspection must engage an NSE-empanelled auditor to conduct a compliance audit
  • The auditor must certify compliance against applicable laws: SEBI Act 1992, Securities Contracts (Regulation) Act 1956, Securities Contracts (Regulation) Rules 1957, SEBI (Stock Brokers) Regulations 1992, and NSE Bye-laws/Regulations
  • Auditors must provide UDIN (Unique Document Identification Number) on the certificate
  • Auditor details required: Firm Name, Firm Registration Number, Auditor Name, Designation, Membership Number, UDIN, Date, and Place
  • Annexure A must list all SEBI observations requiring corrective action and the current compliance status for each observation
  • Audit period and period of conducting the audit must be explicitly stated

Important Dates

  • No specific deadline mentioned in the circular content; applies upon receipt of SEBI inspection findings and corrective action directives
  • The SEBI letter/email date prescribing corrective actions must be recorded in the certificate (format: DD-MMM-YY)

Impact Assessment

This circular impacts all NSE Trading Members who are or may be subject to SEBI inspections. The standardised certificate format ensures consistent reporting of corrective action compliance across the industry. Empanelled audit firms must align their reporting to this prescribed format. The operational impact is moderate — it formalises existing audit practices rather than introducing new substantive obligations. No direct market or price impact is anticipated.

Impact Justification

Operational compliance circular affecting all NSE Trading Members subject to SEBI inspections; prescribes mandatory audit certificate format but does not introduce new regulatory requirements.