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Latest from the Regulator - January 2026
1. NFRA Circular on Auditor-Board Communication
The National Financial Reporting Authority (NFRA) has issued a circular aimed at enhancing the effectiveness of communication between statutory auditors and Those Charged With Governance (TCWG) including Boards of Directors and Audit Committees.
This initiative reinforces governance expectations under the Companies Act, 2013 and auditing standards.
Key Highlights:
i. Strengthening Two-Way Communications
• NFRA emphasises that statutory auditors must engage in meaningful two-way communication with Boards/TCWG throughout the audit lifecycle and not just at the end of financial year.
• This includes discussions on:
○ audit scope, risk areas,
○ internal control assessment,
○ fraud indicators, and
○ key accounting judgements
ii. Clarified Governance Obligations
• Boards must ensure that auditors have access to the right governance structure to communicate effectively.
• Auditors should determine who constitutes TCWG (which can include the full Board or a sub-group such as the Audit Committee) and document this determination.
iii. Audit Planning & Risk Dialogue
• Directors should expect auditors to present audit plans and risk assessments early, including discussion on materiality, internal control gaps, and complex estimates.
• This early engagement supports proactive oversight and improved financial reporting quality.
iv. Documentation & Formalisation
• The circular reinforces that all significant communications should be in writing and recorded either through formal meeting minutes or documented reports.
• This ensures clarity and accountability on both sides.
v. Audit Committee's Role Enhanced
• While communication with the full Board remains important, NFRA underscores the Audit Committee's pivotal oversight role in reviewing auditor findings and key risks.
For more details, please visit:
2. SEBI Strengthens Governance Framework for Market Infrastructure Institutions
The Securities and Exchange Board of India (SEBI), on 12 December 2025, issued a circular to further fortify the governance framework for Market Infrastructure Institutions (MIIs), including stock exchanges, clearing corporations, and depositories. This move builds on amendments to the Stock Exchange and Clearing Corporation (SECC) Regulations, 2018 and Depositories & Participants (D&P) Regulations, 2018 that came into force from 20 December 2025 and is aimed at enhancing accountability, transparency, and market integrity.
Key Highlights:
1. Appointment of Two Executive Directors (EDs) with Defined Portfolios
SEBI now mandates the appointment of two Executive Directors of appropriate stature, each heading distinct critical verticals:
• Vertical 1 - Critical Operations:
Responsible for core functions such as trading, clearing, settlement, etc.
• Vertical 2 - Regulatory, Compliance, Risk Management & Investor Grievances
Focused on governance, compliance, risk oversight, and grievance redressal. Both EDs will be part of the MII's Governing Board, ensuring operational leadership is embedded at the board level.
2. Transparent and Merit-Based Appointment Process
Appointments to ED roles must be made through open advertisement and rigorous selection, ensuring transparency and attracting highly qualified professionals.
3. Reporting Structure of Executive Directors
EDs of Vertical 1 & 2 shall report to the Managing Director of the MII for all the purposes.
4. Applicability of the Circular for Appointment of EDs
The 1st ED shall be appointed within six months, nd and the 2nd ED within nine months, from the date of implementation of the amendments to the SECC Regulations, 2018 and the D&P Regulations, 2018.
For more details, please visit:
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