Standardized format for System and Network audit report of Market Infrastructure Institutions(MIIs)
Summary
This circular mandates a standardized format for System and Network audit reports for Market Infrastructure Institutions (MIIs) to enhance data quality and compliance monitoring. The new format, detailed in Annexure A, must be adopted by all Stock Exchanges, Clearing Corporations, Depositories, and Commodity Derivatives Segments. The requirements become applicable for the FY 2024-25 audit period, requiring MIIs to implement necessary systemic changes.
Text
SEBI has stipulated the guidelines for System and Network audit for MIIs as mentioned below: Clause 8.1 of Chapter 2 of Master Circular No. SEBI/HO/MRD2/PoD-2/CIR/P/2024/181 dated December 30, 2024 for Stock Exchanges and Clearing Corporations; Clause 4.29 of SEBI Master Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/168 dated December 03, 2024 for Depositories; Clause No. 16.3 of SEBI Master Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136 dated August 04, 2023 for Commodity Derivatives Segment.
In view of the same, the format of report adopted by MIIs for System and Network audit was reviewed by SEBI in consultation with the Technology Advisory Committee (TAC) of SEBI. Based on the recommendations of the Committee and in consultation with MIIs, a standardized format for System and Network Audit report for MIIs has been prepared and the same is enclosed as Annexure A.
The standardized format for System and Network Audit report would help to increase the data quality, capture of relevant information as per regulatory requirements in a streamlined and standardized manner across MIIs, monitor compliance requirements in a more focused manner, ease of traceability of current/historical open observations found during audit at the end of MII and SEBI by assigning a unique ID to each observation.
The Circular shall become applicable for audit period FY 2024-25 or second half of FY 2024-25 as per the frequency of System and Network audit required to be conducted by the MII.
MIIs are required to take necessary steps to put in place systems for implementation of the Circular, including necessary amendments to the relevant bye-laws, rules and regulations, if any.
This Circular is being issued in exercise of the powers conferred by Section 11(1) of Securities and Exchange Board of India Act, 1992 read with Regulation 51 of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and Section 19 of the Depositories Act, 1996 read with Regulation 97 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to protect the interest of investors in securities market and to promote the development of, and to regulate the securities market.
Unique ID shall be assigned to each unique observation found during audit and its format shall be “Name of MII-SNFYYYY”. The description of the same is mentioned below: Name of MII shall be written in short form such as NSE/BSE/NCL/ICCL/MSEI/NSDL/CDSL/MCX/MCXCCL/NCCL/NCDEX; S represents observation found in System and Network audit; N represents ith observation found during particular audit period i.e. serial number of unique observation i.e. 1,2……n; F represents frequency of audit i.e. value of F=0 in case of audit is being done for full financial year, F=1 in case of audit is being done for first half of any financial year, F=2 in case of audit is being done for second half of any financial year; YYYY represents the financial year for which audit is being carried out by auditor.
Source: SecMarx — Standardized format for System and Network audit report of Market Infrastructure Institutions(MIIs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.