IFSCA Prescribes Annual Compliance Audit Reporting Framework for CMIs: What Capital Market Intermediaries Need to Know
Every Capital Market Intermediary (CMI) registered with the International Financial Services Centres Authority (IFSCA) is required to undergo an Annual Compliance Audit under the IFSCA (Capital Market Intermediaries) Regulations, 2025. To standardize this process, IFSCA issued a circular dated 5 June 2026 introducing a comprehensive Annual Compliance Audit Reporting Framework that prescribes the format, scope, reporting requirements, and submission process for compliance audits.
The new framework introduces the Annual Compliance Audit Report (ACAR) and Annual Compliance Audit Checklist (ACAC), providing a consistent approach to evaluating regulatory compliance, governance, risk management, investor protection, AML/KYC obligations, and reporting standards across all Capital Market Intermediaries operating in GIFT IFSC.
This circular applies to a wide range of registered intermediaries, including Broker Dealers, Investment Advisers, Research Entities, Distributors, Custodians, Clearing Members, Depository Participants, Global Access Providers (GAPs), and other IFSCA-regulated entities. It also introduces additional compliance reporting requirements for members of Market Infrastructure Institutions (MIIs), further strengthening regulatory oversight within the IFSC ecosystem.
In this guide, we explain the IFSCA Annual Compliance Audit Framework, including the purpose of ACAR and ACAC, key regulatory changes, filing timelines, audit requirements, reporting obligations, and practical steps Capital Market Intermediaries should take to ensure compliance.
What is the IFSCA Annual Compliance Audit?
The IFSCA Annual Compliance Audit is a mandatory annual review conducted to assess whether Capital Market Intermediaries (CMIs) registered in GIFT IFSC comply with the regulatory requirements prescribed by the International Financial Services Centres Authority (IFSCA). The audit evaluates an intermediary’s governance framework, internal controls, risk management practices, AML/KYC compliance, investor protection measures, record-keeping, and regulatory reporting obligations.
Under the reporting framework introduced through the IFSCA circular dated 5 June 2026, the audit findings must be documented using the Annual Compliance Audit Report (ACAR) and the Annual Compliance Audit Checklist (ACAC), ensuring a standardized and transparent compliance reporting process across all regulated Capital Market Intermediaries.
Quick Facts: IFSCA Annual Compliance Audit Framework
| Particular | Details |
|---|---|
| Regulator | International Financial Services Centres Authority (IFSCA) |
| Circular Date | 5 June 2026 |
| Applicable To | Capital Market Intermediaries (CMIs) registered in GIFT IFSC |
| Legal Framework | IFSCA (Capital Market Intermediaries) Regulations, 2025 |
| Audit Frequency | Annual |
| Reporting Documents | Annual Compliance Audit Report (ACAR) and Annual Compliance Audit Checklist (ACAC) |
| Submission Deadline | 30 September each year |
| Additional Filing | Broker Dealers, Clearing Members, and Depository Participants must also submit reports to their respective Market Infrastructure Institution (MII), where applicable. |
Background of the Annual Compliance Audit Requirement
The CMI Regulations, 2025 introduced a framework requiring Capital Market Intermediaries to conduct an annual audit of their compliance with applicable regulatory requirements and submit the audit report to IFSCA.
The objective of the annual compliance audit is not merely to verify regulatory filings but to assess whether an intermediary has established effective systems, controls, governance mechanisms, and compliance processes to meet its regulatory obligations.
As the IFSC ecosystem continues to attract global participants, IFSCA’s focus has increasingly shifted towards ensuring that regulated entities maintain compliance standards comparable to leading international financial centres.
The latest circular operationalizes this requirement by introducing a standardized reporting framework applicable across the industry.
What Has Changed Through the Circular Dated 5 June 2026?
One of the most significant developments introduced by the circular is the standardization of annual compliance audit reporting.
Prior to the circular, the CMI Regulations mandated the audit requirement but did not prescribe a detailed reporting framework. The circular now introduces:
- Annual Compliance Audit Report (ACAR)
- Annual Compliance Audit Checklist (ACAC)
- Standardized submission requirements
- Category-specific compliance reporting
- Additional reporting obligations for MII members
- Integration of Global Access audit reporting into the annual audit framework
The introduction of a uniform reporting format is expected to improve consistency, transparency, and comparability of compliance audits across various categories of intermediaries operating within GIFT IFSC.
Understanding the ACAR and ACAC Framework
The circular requires every Capital Market Intermediary to submit an Annual Compliance Audit Report (ACAR) together with the Annual Compliance Audit Checklist (ACAC).
The ACAC has been structured into distinct sections to ensure comprehensive coverage of compliance obligations.
Part A – General Obligations Applicable to All CMIs
Part A covers the core regulatory obligations applicable to every Capital Market Intermediary regardless of the category of registration.
These generally include:
- Governance and oversight requirements
- Compliance monitoring mechanisms
- Regulatory reporting obligations
- Investor protection measures
- Record-keeping requirements
- Risk management processes
- AML/CFT compliance obligations
This section ensures that fundamental compliance requirements are assessed consistently across all intermediaries.
Part B – Category-Specific Compliance Requirements
Part B focuses on obligations specific to the category of registration or authorization held by the intermediary.
Depending on the nature of activities undertaken, the checklist may cover requirements applicable to:
- Broker Dealers
- Investment Advisers
- Research Entities
- Distributors
- Custodians
- Depository Participants
- Clearing Members
- Global Access Providers
- Other registered CMIs
This approach allows the audit framework to remain relevant and proportionate to the intermediary’s business model and regulatory responsibilities.
Part C – Compliance Requirements Prescribed by MIIs
The circular introduces an additional layer of compliance reporting for entities that hold memberships with Market Infrastructure Institutions (MIIs).
Market Infrastructure Institutions include:
- Stock Exchanges
- Clearing Corporations
- Depositories
The respective MII is required to provide a compliance checklist covering applicable rules, regulations, bye-laws, and circulars governing its members.
This checklist forms Part C of the Annual Compliance Audit Checklist and becomes an integral component of the annual audit process.
Filing Requirements and Compliance Timeline
The circular prescribes a clear annual filing framework for all CMIs.
Every intermediary is required to submit:
- Annual Compliance Audit Report (ACAR)
- Annual Compliance Audit Checklist (ACAC)
The submission must be made to IFSCA on an annual basis for the preceding financial year.
The due date prescribed by the circular is 30 September of each year.
Accordingly, intermediaries should ideally begin their audit preparation several months before the due date to ensure timely completion of compliance reviews, documentation verification, management representations, and audit procedures.
Early preparation can significantly reduce the risk of last-minute compliance gaps and regulatory observations.
Additional Requirements for Broker Dealers, Clearing Members and Depository Participants
The circular imposes additional reporting requirements on certain categories of intermediaries.
A Capital Market Intermediary registered as a:
- Broker Dealer
- Clearing Member
- Depository Participant
must submit a copy of the ACAR along with the ACAC not only to IFSCA but also to the respective Market Infrastructure Institution of which it is a member.
This means that such entities will need to demonstrate compliance not only with IFSCA regulations but also with the applicable rules, regulations, bye-laws, and circulars issued by the relevant stock exchange, clearing corporation, or depository.
The requirement reinforces accountability and strengthens supervisory coordination between IFSCA and MIIs.
Annual Compliance Audit for Global Access Providers and Introducing Brokers
The circular also addresses annual audit requirements relating to Global Access activities.
Under the existing Global Access framework, Global Access Providers (GAPs) and Introducing Brokers were already required to undergo annual audits of their Global Access operations.
The latest circular integrates these audit requirements into the broader Annual Compliance Audit framework.
As a result, the audit findings relating to Global Access activities are now required to be reported through the prescribed ACAR and ACAC framework.
This change simplifies reporting and promotes a more consolidated approach to regulatory compliance.
Practical Steps for CMIs to Prepare for Compliance Audit
Given the enhanced reporting framework, CMIs should adopt a proactive approach towards audit readiness.
Some practical measures include:
Review Applicable Compliance Requirements
Entities should identify the specific obligations applicable to their registration category and business activities.
Download Latest Audit Checklist
Since IFSCA may revise reporting formats from time to time, intermediaries should ensure that they use the latest ACAC available on the IFSCA website.
Conduct Internal Gap Assessment
A detailed internal review should be undertaken to identify compliance deficiencies before commencement of the audit.
Verify Regulatory Filings
All periodic filings, returns, disclosures, and submissions should be reviewed for completeness and accuracy.
Review AML and KYC Documentation
Client onboarding records, due diligence documentation, risk categorisation processes, and AML monitoring procedures should be assessed carefully.
Reconcile Client Accounts and Records
Entities dealing with client assets should verify reconciliations and ensure proper segregation of client and proprietary assets.
Organize Supporting Documentation
Policies, procedures, board minutes, compliance reports, risk assessments, and regulatory correspondence should be maintained in an audit-ready manner.
A well-prepared intermediary is more likely to experience a smooth audit process and minimize potential regulatory observations.
Common Compliance Mistakes to Avoid During the Annual Compliance Audit
Even well-established Capital Market Intermediaries (CMIs) may encounter compliance issues during their Annual Compliance Audit. Identifying and addressing these gaps before the audit can help reduce regulatory observations and strengthen the overall compliance framework.
Some common compliance mistakes include:
- Incomplete or outdated AML/KYC documentation for clients.
- Delayed regulatory filings or non-submission of periodic reports to IFSCA.
- Insufficient documentation to support compliance with internal policies and regulatory requirements.
- Weak governance practices, including missing board or committee approvals where required.
- Inadequate record-keeping and failure to retain compliance records for the prescribed period.
- Gaps in risk management and internal control processes, particularly where business activities have evolved.
- Failure to comply with Market Infrastructure Institution (MII) requirements by Broker Dealers, Clearing Members, and Depository Participants.
- Using outdated compliance checklists or reporting formats instead of the latest ACAR and ACAC prescribed by IFSCA.
Conducting periodic internal compliance reviews throughout the year, rather than waiting until the annual audit, can help identify these issues early and ensure a smoother audit process.
Consequences of Non-Compliance with the IFSCA Annual Compliance Audit Framework
Failure to comply with the Annual Compliance Audit requirements may attract regulatory scrutiny from IFSCA. While the circular primarily prescribes the audit reporting framework, Capital Market Intermediaries are expected to comply with the applicable provisions of the IFSCA (Capital Market Intermediaries) Regulations, 2025 and any related circulars or directions issued by the Authority.
Non-compliance may result in:
- Increased regulatory scrutiny or inspections by IFSCA.
- Regulatory observations requiring corrective actions within specified timelines.
- Requests for additional information, documentation, or clarifications.
- Delays in regulatory approvals or other supervisory processes, where applicable.
- Reputational risks arising from weak governance and compliance practices.
- Supervisory or enforcement actions where material or repeated non-compliance is identified, in accordance with the applicable regulatory framework.
Maintaining a robust compliance framework, conducting periodic internal reviews, and addressing identified gaps well before the annual filing deadline can help Capital Market Intermediaries meet regulatory expectations and reduce the risk of adverse observations.
Important Note
Avoid stating specific monetary penalties or sanctions unless the 2025 Regulations or the 5 June 2026 circular explicitly prescribe them. The circular mainly deals with the reporting framework, so it’s safer and more accurate to refer to regulatory scrutiny, supervisory actions, and enforcement under applicable regulations rather than inventing penalties.
How Nexpective Advisors Helps Capital Market Intermediaries
Navigating the IFSCA regulatory framework requires a proactive and well-structured compliance approach. Nexpective Advisors assists Capital Market Intermediaries (CMIs) operating in GIFT IFSC with end-to-end regulatory compliance, helping them meet IFSCA requirements while strengthening their governance and internal control framework.
Our compliance support includes:
- Annual Compliance Audit readiness assessments and gap analysis
- Review and implementation of regulatory compliance frameworks
- Assistance with ACAR and ACAC documentation and reporting
- Compliance monitoring and regulatory reporting support
- AML/KYC and risk management framework reviews
- Development and review of internal policies, procedures, and compliance manuals
- Ongoing advisory on IFSCA regulations, circulars, and compliance updates
Whether you are a Broker Dealer, Investment Adviser, Clearing Member, Custodian, Depository Participant, Research Entity, or another IFSCA-regulated intermediary, our team provides practical, regulator-focused guidance to help you maintain compliance and prepare confidently for annual audits.
Conclusion
The IFSCA Annual Compliance Audit Framework introduced through the circular dated 5 June 2026 strengthens the compliance and governance standards for Capital Market Intermediaries operating in GIFT IFSC. By standardizing the audit process through the Annual Compliance Audit Report (ACAR) and Annual Compliance Audit Checklist (ACAC), IFSCA has established a more transparent and consistent framework for assessing regulatory compliance across the IFSC ecosystem.
For Capital Market Intermediaries, the annual compliance audit is more than a regulatory filing requirement. It is an opportunity to evaluate governance practices, strengthen internal controls, improve risk management, and demonstrate a strong culture of compliance. Proactive preparation, accurate documentation, and timely completion of audit requirements can help entities meet regulatory expectations while minimizing compliance gaps and audit observations.
As IFSCA continues to enhance the regulatory framework for GIFT IFSC, maintaining an effective compliance management system and staying updated with evolving regulatory requirements will be essential. Businesses that adopt a proactive approach to compliance will be better positioned to build regulatory confidence, support sustainable growth, and operate successfully within India’s international financial services ecosystem.
