SEBI/HO/MRD/POD 3/P/CIR/2025/69 — THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

CIRCULAR SEBI/HO/MRD/POD 3/P/CIR/2025/69 May 19 , 2025 To All Recognized Stock Exchanges All Recognized Clearing Corporations All Depositories Sir/Madam, Subject: Norms for Internal Audit Mechanism and composition of the Audit Committee of Market Infrastructure Institutions Stock Exchanges, Clearing Corporations and Depositories (hereinafter referred as Market Infrastructure Institutions (MIIs)) are institutions that provide vital capital market infrastructure for trading; clearing & settlement; and holding, transfer & record keeping of securities. MIIs have a unique operating model in that they are empowered by law to regulate their members such as Trading Members, Clearing Members, Depository Participants, etc . The primary objective of an MII is to focus more towards serving as a crucial public utility infrastructure institution and a first line regulator for its constituents, while operating as efficient, innovative and competitive commercial entity. A. Norms for the Internal Audit Mechanism at MIIs It is essential that the MIIs shall operate in an efficient and transparent manner, be accountable for their actions, maintain highest standards of governance and risk management, etc. Internal audit helps to identify, assess, and mitigate risks that could impact the MII's operations, efficiency, financial stability, etc. Internal audit also ensures that the MII's comply with relevant laws, regulations, circulars, guidelines, industry standards, etc . MIIs being corporate entities governed by the provisions of Companies Act, 2013 are required to conduct Internal Audit. Further, in terms of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (SECC Regulations, 2018) and Securities and Exchange Board of India (Depositories and Pa