SEBI Requires MIIs to Audit Systems and Networks, Submit Noncompliance Reports

SEBI (Securities and Exchange Board of India) has asked market infrastructure institutions (MIIs) to provide detailed reports on any noncompliance found during system and network assessments.

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In January 2020, SEBI revised its framework for system audits conducted by stock exchanges, clearing corporations and depositories.

In a new circular, SEBI said it has identified a need to further revise the framework, based on discussions with MIIs and recommendations from its technical advisory committee.

The revised framework requires MIIs to conduct system and network audits and produce reports which contain information on all major noncompliance issues identified in the audits.

The audit reports should first be placed before each MII's governing board, and then be submitted to SEBI along with comments from the MII's management – within one month from the completion of the audit.

The reports should highlight information about "exceptional major noncompliances" identified from the system and network audit, including information on current and previous issues which remain open.

MIIs must also submit to SEBI joint declarations from their managing director, CEO and CTO certifying the security and integrity of their IT systems and the correctness and completeness of data provided to the auditor.

The joint declaration must certify that the MII's entire network architecture, connectivity (including co-location facilities), and linkages to trading infrastructure are in conformity with regulatory requirements and provide fair equitable, transparent and non-discriminatory treatment to all the market participants.