In terms of the instructions issued by the Ministry of Finance, Government of India, Stock Exchanges are required to inspect the books of accounts of at least 10% of their active members in a financial year. The Inspection Department of the Exchange has been entrusted with this responsibility. Notably, every year, the number of inspections carried out by the Exchange, far exceeds the level prescribed in this regard by the Ministry of Finance.

The Exchange has also constituted a panel of Chartered Accountants to conduct inspection of the book and accounts of the members. The purpose of involving independent Chartered Accountants in this work is to inspect the books of accounts of every members atleast once in every three years.

The Exchange has also prepared a detailed Guidance Manual for inspection of member-brokers to assist the Chartered Accountants in the inspection of the books of accounts of members.

The purpose of the inspection is to verify whether the member has maintained the required books of accounts as per the Securities Contracts (Regulation) Rules, 1957, whether the member has issued contract notes in the proper format prescribed by the Exchange, whether brokerage has been indicated separately therein, whether the member has adhered to the Rules, Regulations and By-laws of the Exchange and guidelines issued by the Exchange and SEBI from time to time, etc.

The findings of the inspection are conveyed to the members and follow-up action including imposition of fines, etc. is taken based on the responses/clarifications provided by the members. If the violations are of serious nature, the matter is referred to the Disciplinary Action Committee of the Exchange.

The members are required to get their annual accounts audited from a Chartered Accountant and submit an Audit Certificate as well as the Profit & Loss Account and Balance Sheet to the Exchange. The members are also required to submit networth certificates as at the end of March and September every year. Filing of these documents by the members is also monitored by the Inspection Department.

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