The National Commodity & Derivatives Exchange Limited, (NCDEX), on March 11, 2024, issued a notification regarding the Guidelines for appointment of internal Auditors by all Clearing Members (PCM, STCM and TCM for clearing activities).
As per SEBI Circular dated September 26, 2016, and subsequent NCCL Circulars, all Clearing Members conducting clearing activities for stockbrokers and custodian participants must perform half-yearly internal audits and submit reports to National Commodity Clearing Limited (NCCL). Auditors empaneled with any Exchange can conduct these audits, making compliance easier and reducing operational difficulties.
The appointment and rotation of internal auditors are governed by SEBI's guidelines, which state that an individual auditor can serve a maximum of five consecutive years, while an audit firm can serve for two terms of five consecutive years each. After completion of their term, there is a mandatory cooling-off period of five years before reappointment. Additionally, audit firms with common partners from recently expired tenures are disqualified for five years.
Auditors must be qualified Chartered Accountants, Company Secretaries, or Cost and Management Accountants with at least five years of experience. Firms auditing Qualified Stock Brokers (QSBs) must have a minimum of five partners, including at least two full-time partners. Furthermore, auditors must possess relevant certifications, such as NISM Series-XIV, NISM Series III-A, or ICAI’s Financial Markets and Securities Laws course.
[Notification No. NCCL/INSPECTION-002/2025]
