IFSCA Prescribes Annual Compliance Audit Reporting Framework for CMIs: What Capital Market Intermediaries Need to Know

The International Financial Services Centres Authority (IFSCA) has taken another significant step towards strengthening regulatory governance within GIFT IFSC by issuing a circular dated 5 June 2026 prescribing the reporting format and compliance norms for the Annual Compliance Audit of Capital Market Intermediaries (CMIs).

While the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2025 already required CMIs to undergo an annual compliance audit, the latest circular brings much-needed clarity regarding the format, scope, reporting structure, and submission requirements of such audits.

The circular is relevant for all Capital Market Intermediaries operating in IFSC, including Broker Dealers, Investment Advisers, Research Entities, Distributors, Custodians, Clearing Members, Depository Participants, Global Access Providers (GAPs), and other registered intermediaries.

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.

Conclusion

The IFSCA circular dated 5 June 2026 marks an important milestone in strengthening compliance governance within GIFT IFSC. By introducing the Annual Compliance Audit Report (ACAR), the Annual Compliance Audit Checklist (ACAC), and a standardized reporting framework, IFSCA has provided greater clarity and consistency in the annual compliance audit process.

For Capital Market Intermediaries, the circular represents more than an additional reporting requirement. It underscores the growing importance of governance, risk management, investor protection, and regulatory accountability within the IFSC ecosystem.

Entities that proactively assess their compliance framework, strengthen documentation practices, and prepare well in advance of the filing deadline will be better positioned to meet regulatory expectations and maintain confidence among regulators, investors, and market participants.