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Latest from the Regulator - May 2025
SEBI issues New Internal Audit Guidelines for Market Infrastructure Institutions (MIIs)
SEBI has introduced comprehensive internal audit guidelines for Market Infrastructure Institutions (MIIs) including Stock Exchanges, Clearing Corporations, and Depositories - to enhance transparency, governance, and operational efficiency.
• The new framework mandates that all MIIs must conduct an internal audit of every function at least once in a financial year.
• These functions are categorized under three verticals: critical operations; regulatory, compliance, and risk management; and business development activities.
• The audits must be carried out by independent external firms and report directly to the audit committee, which is also responsible for approving the auditor's appointment and audit scope.
SEBI emphasized that internal audits are crucial to identifying and mitigating risks while ensuring adherence to legal and regulatory standards. To ensure sector-wide uniformity, SEBI recommended that MIIs collaborate with the Industry Standards Forum to standardize audit terms of reference. This move underscores SEBI's commitment to robust market infrastructure and investor trust.
Revision of Audit Committee Norms for Market Infrastructure Institutions by SEBI
SEBI issued a pivotal circular reforming the Audit Committee framework for Market Infrastructure Institutions. The circular directs the following:
• It mandates the exclusion of all executive directors, including managing directors, from audit committees to reinforce independent oversight.
• Executive directors may attend meetings only upon the audit committee chairman's invitation and without voting rights, thereby safeguarding the committee's autonomy.
• A stringent governance protocol is prescribed whereby the audit committee must receive biannual internal audit reports within 60 days post the September and March quarter-ends. These reports, delivered in the absence of management, are designed to enhance objectivity and ensure robust risk management, regulatory compliance, and operational integrity.
This regulatory update underscores SEBI's commitment to strengthening MIIs' governance frameworks by fortifying audit committee independence, thereby elevating transparency and investor confidence across India's capital markets ecosystem.
SEBI tightens Cybersecurity Norms for Market Intermediaries, sets June 30 Compliance Deadline
SEBI has revised its Cybersecurity and Cyber Resilience framework for Regulated Entities, setting June 30, 2025, as the compliance deadline.
• The updated norms reclassify intermediaries such as stock brokers, portfolio managers, investment advisors, merchant bankers, and fund managers based on client size, trading volume, or asset size. Stock brokers and portfolio managers are now categorised into qualified, mid-size, small-size, or self-certification entities, with specific thresholds defined for each.
• Entities like standalone investment advisors and research analysts are exempt, while those registered under multiple capacities must follow the highest applicable category.
• Market Infrastructure Institutions and Qualified Entities must deploy Hardware Security Modules, while others may use alternate controls.
• Additionally, KYC Registration Agencies are reclassified as Qualified Entities.
The circular mandates stock exchanges and depositories to notify members and ensure compliance, reinforcing SEBI's commitment to cybersecurity and systemic risk mitigation in capital markets.
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Institute of Directors India
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Institute of Directors (IOD) is an apex national association of Corporate Directors under the India's 'Societies Registration Act XXI of 1860'. Currently it is associated with over 31,000 senior executives from Govt, PSU and Private organizations of India and abroad.
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Disclaimer: The opinions expressed in the articles/ stories are the personal opinions of the author. IOD/ Editor is not responsible for the accuracy, completeness, suitability, or validity of any information in those articles. The information, facts or opinions expressed in the articles/ speeches do not reflect the views of IOD/ Editor and IOD/ Editor does not assume any responsibility or liability for the same.
