Updated penalties for audit report submissions
Note: This revised circular is in reference to NSE Circular Ref No-NSE/INSP/53530 dated September 02, 2022, NSE/INSP/54386 dated November 11, 2022, & NSE Circular No- NSE/INSP/56308 dated April 10, 2023.
Introduction
This circular aims to inform trading members about the updated framework of penalties and disciplinary actions related to the submission of preliminary audit reports, Action Taken Reports (ATR), Follow-on Audit Reports, and the closure of reported observations in System Audit Reports and Cyber Security & Cyber Resilience Audit Reports.
Penalties and Disciplinary Actions
The revised penalties and disciplinary actions for any delays or non-submissions of the preliminary audit report, ATR, and Follow-on Audit Report are outlined in Table-A:
Table-A: Penalty/Disciplinary Action for Delayed/Non-submission of Preliminary Audit/ATR/Follow-on Audit Report
| Violation Details | Period of Violation | Penalty/Disciplinary Actions | Penalty/Disciplinary Action for Repeated Violation |
| From 1st day to 7th day | Charges of Rs. 1,500/- per day for Non-QSB Members & Rs. 3,000/- per day for QSB Members | Applicable monetary penalty along with an escalation of 50% if repeated | Levy of applicable monetary penalty along with an escalation of 50% |
| From 8th day to 21st day | Charges of Rs. 2,500/- per day for Non-QSB Members & Rs. 5,000/- per day for QSB Members | Applicable monetary penalty along with an escalation of 50% if repeated | Levy of applicable monetary penalty along with an escalation of 50% |
| From 22nd day onwards | New client registration shall be prohibited and notice of 7 calendar days for disablement of trading facility issued until submission of report | Disablement notice will be shared with all Exchanges for information | Member disabled in all segments until submission of report |
| After 28th day | Member disabled in all segments until submission of report | – | – |
It is mandatory for members to submit the closure status for all non-compliances reported in the System Audit and Cyber Security & Cyber Resilience Audit by submitting the Action Taken Report (ATR) within the prescribed timelines. Failure to close observations within the given timeline will result in penalties, as shown in Table-B:
Table-B: Penalty/Disciplinary Action for Non-closure of Observations reported in System Audit Report & Cyber Security and Cyber Resilience Audit Report
| Risk Rating Reported by Auditor | High Risk | Medium Risk | Low Risk |
| Non QSB Members – System Audit Report | ₹ 15,000 | ₹ 7,500 | ₹ 2,500 |
| Non QSB Members – Cyber Audit Report | ₹ 50,000 | ₹ 25,000 | ₹ 5,000 |
| QSB Members – System Audit Report | ₹ 30,000 | ₹ 15,000 | ₹ 5,000 |
| QSB Members – Cyber Audit Report | ₹ 100,000 | ₹ 50,000 | ₹ 10,000 |
Additional actions will be taken if observations are not closed within three weeks from the due date for submission of the ATR. This includes prohibiting new client registration and issuing a notice of 7 days for the disablement of trading facility until closure of the observation(s). Non-closure of observations within four weeks from the due date of ATR submission will result in member disability across all segments until the observations are closed.
Applicability and Conclusion
These provisions are applicable from the submissions of System Audit and Cyber Security & Cyber Resilience Audit Reports for the half-year ended September 2023 and onwards. It is advised to the all members that they all take note of these changes and implement adequate systems and procedures to ensure strict compliance with the requirements.
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