Securities Lending & Borrowing Scheme

Process of approval from Exchange Whether member has obtained specific approval from the exchange?

Verification of SLBS agreement Whether member has complied with regulatory requirements related to SLBS ?

SEBI circular no. MRD/DoP/SE/Dep/Cir-14 /2007 dated the December 20, 2007

SEBI circular no. MRD/DoP/SE/Cir- 31 /2008 dated October 31, 2008

Exchange notice no. 20071224-10 dated December 24, 2007

Exchange notice no. 20080128-3 January 28, 2008

Exchange notice no. 20080130-38 dated January 30, 2008

Exchange notice no. 20080417-23 dated April 17, 2008

Exchange notice no. 20081223-15 dated

Points to be noted

The guidelines prescribed hereunder do not limit the scope of the internal audit. The points mentioned are only indicative in nature and not exhaustive. This has been prepared based on the regulatory requirement (as per relevant acts, rules, regulations and circulars) which keep on developing from time to time. The auditors should peruse them and update the scope of the audit.

The report shall also include the following.

1. If any major significant deviations and deviations of recurring nature are observed, the same should be reported separately in the covering page of the audit report. If auditors observations are in the nature of a deviation or a recommendation, the member’s response should be sought and recorded in the report.

2. Comments by auditor on the status of compliance in respect of deviations reported in the last audit report,

3. Improvements brought about in the operations between the last audit and the current audit.

4. In case the member has been inspected in the relevant half year by the Exchange / SEBI, comments by the auditor on whether the member has complied with the observations made in the Exchange/SEBI inspection report are to be included in the audit report.

5. A statement by the auditor that the provisions of SCRA 1956, SEBI Act 1992, SEBI (Stock Brokers and Sub-brokers) Regulations 1992, Rules, Bye laws, Regulations and circulars of SEBI, agreements, Bye laws of Exchange, circulars of Clearing House, data security and insurance have been covered in the audit.

6. Auditor shall specifically declare about direct / indirect interest in or relationship with the member or its share holders / directors / partners / proprietors / management, if any and also confirm that they do not perceive any conflict of interest in such relationship / interest while conducting internal audit of the said member.

7. Membership number allotted by the affiliated professional body should be quoted at the bottom of the report as provided in the format.

8. Observations in the report should be quantified giving instance wise details, details of segment and activity (trading or clearing) for which such violations are observed.

Annexure - 3 CERTIFICATE FOR INTERNAL AUDIT

We have examined the relevant books of accounts, records and documents maintained by M/s. _______________, (name of the trading/clearing member) bearing SEBI registration number ______________________) a member of the National Stock Exchange of India Limited / Bombay Stock Exchange Ltd. / MCX-Stock Exchange /other Stock Exchange, for the following segments to fulfill the internal audit requirement as prescribed by SEBI vide circulars dated August 22, 2008 & October 21, 2008, for the half year ended_____________________.

Segments

(Cash Segment/Derivatives Segment / Debt Segment /Currency Derivatives/Securities Lending & Borrowing segment)

Activity

(Trading/Clearing/Trading and Clearing)

SEBI registration number

The purpose of this audit is to examine that the processes, procedures followed and the operations carried out by the Trading Member/Clearing Member are as per the applicable Acts, Rules, Regulations, Bye-laws and Circulars prescribed by SEBI and the Stock Exchange.

We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of this internal audit. In our opinion proper books of accounts, records & documents, as per the regulatory requirement have been maintained by the member, so far as it appears from examination of the books.

We have conducted the audit within the framework provided by SEBI/Stock Exchange for the purpose of this internal audit.

To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud / non-compliance /violation by the member is observed during the course of this audit.

Based on the scrutiny of relevant books of accounts, records and documents, we certify that the member has complied with the relevant provisions of SEBI Act, 1992, Securities Contracts (Regulation) Act 1956, Securities Contracts (Regulation) Rules 1957, SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 and various circulars of SEBI. The member has complied with the Rules, Bye-laws, Regulations of BSE / NSE / MCX-SE and various circulars issued by the Stock Exchange and Clearing Corporation/Clearing House.

We declare that we do not have any direct / indirect interest in or relationship with the member or its directors / partners / proprietors / management and also confirm that we do not perceive any conflict of interest in such relationship / interest while conducting internal audit of the member.

In our opinion and to the best of our information and according to the explanations given to us by the proprietor/partner(s)/director(s)/compliance officer, the Report provided by us as per the Annexure and subject to our observations, which covers the entire scope of the audit, is true and correct.

__________________

Company Secretary / Cost and Management Accountant / Chartered Accountant (Seal & Signature)

(Name of the Proprietor / Partner)

Membership no. / CP. No.

Place:-

Date:-

7