Sebi Unveils New System Audit Framework for Professional Clearing Members

The Securities and Exchange Board of India (Sebi) has introduced a framework for the system audit of Professional Clearing Members (PCMs) to ensure compliance. The audit will start with FY24, and PCMs must report both major and minor non-compliances. The framework includes guidelines for auditor selection and penalties for delayed audit report submissions.

The Securities and Exchange Board of India (Sebi) has announced the implementation of a comprehensive framework for the system audit of Professional Clearing Members (PCMs), starting immediately. The initial audit will begin for the fiscal year 2024, with focus on adherence to compliance protocols.

According to Sebi, the audits will be conducted according to established norms and guidelines, with clearing corporations (CCs) mandated to create a uniform penalty structure to ensure timely audit report submissions. The governing boards of PCMs will oversee the selection and appointment of auditors, who can serve a maximum of three consecutive terms, followed by a mandatory two-year cooling-off period.

The framework also requires PCMs to maintain detailed records of Sebi and CCs directives and report any unresolved issues from current and prior audits. The final systems audit report, including management comments and compliance status, must be submitted to CCs within a month of the audit's completion. This directive follows Sebi's October 2023 guidelines on system audits for stock brokers and trading members.

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