OTC EXCHANGE OF INDIA

CIRCULAR

DEPUTY GENERAL MANAGER

MARKET REGULATION DEPARTMENT

DIVISION OF MARKET SUPERVISION

Tel : 26449261, Fax : 26449021

Email : manojk@sebi.gov.in

MRD/DMS/Cir-29/2008

October 21, 2008

The Managing Director / Executive Director

of all Stock Exchanges

Dear Sir,

Sub: Internal Audit for stock brokers/trading members/clearing members

In partial modification of SEBI circular No. MIRSD/ DPSIII/ Cir-26/ 08 dated

August 22, 2008 on the above subject, it has now been decided that stock

brokers/trading members/clearing members shall carry out complete internal

audit on a half yearly basis by chartered accountants, company secretaries

or cost and management accountants who are in practice and who do not

have any conflict of interest.

The Stock Exchanges are advised to:

1. make necessary amendments to the relevant bye-laws, rules and

regulations for the implementation of the above decision immediately,

2. bring the provisions of this circular to the notice of the member brokers

/clearing members of the Exchange and also to disseminate the same

on the website, and

3. communicate to SEBI, the status of the implementation of the

provisions of this circular in the Monthly Development Report.

It may be noted that the other provisions of the said circular remain

unchanged.

This circular is being issued in exercise of the powers conferred by Section

11 (1) of Securities and Exchange Board of India Act, 1992 to protect the

interest of investors in securities and to promote the development of, and to

regulate, the securities market.

Yours faithfully,

MANOJ KUMAR