On Jan. 31, IND SEBI issued guidelines for conduct of system audit.
IND SEBI prescribed guidelines for the conduct of system audit of stock brokers.
This initiative aims to address the complexities and risks which are associated with stock brokers' technology systems and ensure that audits are conducted effectively.
Follows IND SEBI Oct. 2023 issued master circular for stock exchanges, #188261.
Guidelines
Stock exchanges must develop web portal to track entire audit lifecycle, verify auditor presence via geo-location, ensure secure access via one time password authentication.
Auditors must log visits, document findings, collect evidence through the portal, while exchanges will conduct surprise checks, especially for qualified stock brokers (QSBs).
In addition, system audits must follow standardized procedures, covering IT infrastructure, compliance with third-party vendors, and previous technical issues.
Exchanges will empanel auditors based on qualifications, experience while enforcing a two-year cooling-off period after three consecutive audits before reappointment.
Auditors must report tech glitches, verify remediation efforts, assess capacity planning, ensure disaster recovery site compliance; non-compliant stock brokers will face financial penalties, auditors failing to conduct proper audits may be de-empaneled.
Exchanges must submit half-yearly reports on audit findings, compliance actions.
Web portal must be developed within six months of the circular’s issuance, with stock exchanges ensuring adequate technological and human resources for implementation.
Effectiveness
Framework will apply from FY 2025-26 audit cycle, i.e. Apr. 1, 2025 to Mar. 31, 2026.
