System Audit of the Professional Clearing Members (PCMs)
- SEBI vide Master Circular No.SEBI/HO/MRD2/PoD-2/CIR/P/2023/171 dated October 16, 2023 at Clause 8.2 of Chapter 2 has specified the comprehensive framework for System Audit of Stock Brokers (SBs)/Trading Members (TMs).
- Based on the discussions with Clearing Corporations (CCs) and Technical Advisory Committee (TAC) of SEBI, it has been decided to devise the framework for system audit of Professional Clearing Members (PCMs).
- In view of the same, PCMs are required to conduct System Audit as per the framework enclosed as Annexure 1 and Terms of Reference (TOR) enclosed as Annexure 2. PCMs are also required to maintain a list of all the relevant SEBI and CCs circulars/ directions/ advices, etc. pertaining to technology and compliance thereof, as per format enclosed as Annexure3and the same shall be included under the scope of System Audit.
- PCMs are also required to submit information with regard to exceptional major Non-Compliances (NCs)/ minor NCs observed in the SystemAudit as per format enclosed as Annexure4and are required to categorically highlight those observations/NCs/suggestions pointed out in the System Audit (current and previous) which remain open.
- The Systems Audit report including compliance with SEBI/CCs circulars/guidelines and exceptional observation format along with compliance status of previous year observations shall be placed before the Governing Board of the PCM and then the report along with the comments of the Management of the PCM shall be communicated to CCs within one month of completion of audit.
- All CCs are jointly advised to devise the appropriate uniform penalty structure for PCMs to ensure that system audit reports are submitted to them within defined timelines as well as audit observations are closed within defined timelines.
- The provisions of the Circular shall come into force with immediate effect. The first audit shall be conducted for FY 2023-24.
- The circular is issued with the approval of the competent authority.
- This circular is being issued in exercise of the powers conferred by Section 11(1) of Securities and Exchange Board of India Act, 1992 to protect the interest of investors in securities market and to promote the development of, and to regulate the securities market.
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