SEBI Update – Norms for Internal Audit Mechanism and composition of the Audit Committee of Market Infrastructure Institutions (Applicable – All Recognized Stock Exchanges All Recognized Clearing Corporations All Depositories )

The Securities and Exchange Board of India (SEBI) issued a pivotal circular aimed at reinforcing the governance structure of Market Infrastructure Institutions (MIIs)  which include Stock Exchanges, Clearing Corporations, and Depositories. SEBI has focused on two core governance areas: the internal audit mechanism and the composition of the Audit Committee of MIIs.

SEBI has made it mandatory for all MIIs to conduct internal audits annually across all their functional verticals:

Vertical 1: Critical operations like trading and settlement.

Vertical 2: Regulatory and compliance activities.

Vertical 3: Business development and other ancillary functions.

The internal auditor of the MII shall be an independent audit firm(s). The MIIs shall have a policy for appointment of internal auditors approved by the Audit Committee and governing board of the MII. 

 Internal auditor of an MII shall report only to the Audit Committee of the MII.

The internal auditor of the MII shall appraise the Audit Committee, at least once in every six months within 60 days from the end of September and March, on critical issues concerning the MII, in the absence of the management.

The provisions of the circular shall be applicable from the 90 th day of issuance of the circular

Link – https://www.sebi.gov.in/legal/circulars/may-2025/norms-for-internal-audit-mechanism-and-composition-of-the-audit-committee-of-market-infrastructure-institutions_94030.html