Peer Review for Practising Company Secretaries (PCS)

Introduction:

Excellence is the hallmark of success in a competitive environment. Performance can be judged and enhanced to a level of excellence only by evaluation by a competent professional. The Council of the Institute, therefore, decided to introduce Peer Review for Practising Company Secretaries (PCS) to periodically evaluate the quality, sufficiency of systems, procedures and practices, so that excellence in their performance is maintained. It examines whether a Practice Unit (PU) has adequate policies and procedures in place to comply with the Technical Standards of ICSI and other legal requirements.

Meaning:

Peer Review is a process used for examining the work performed by one’s equals (peers) and to understand the systems, practices and procedures followed by the Practice Unit and to give suggestions, if any, for further improvement.

In simple terms, it’s a method of evaluation of a person’s work or performance by a group of people in the same occupation, profession, or industry. For continued quality improvement in an atmosphere of openness and mutual trust that contributes to enhancing transparency and comparability it is necessary that good practice is valued and mutual learning encouraged in a dynamic and motivating process, from which both the PU and Reviewer can benefit.

Practice Unit means members in practice, whether practicing individually in own name, or as a sole proprietorship, or as a partner of a firm/LLP of Company Secretaries.

Authority:

In line with section 15 of the act, The Council of the Institute of Company Secretaries of India is constituted under the Company Secretaries Act, 1980 for discharging the functions assigned to the Institute under the Act.

OBJECTIVES:

a. To comply with the Technical Standards laid down by the Institute; and

b. To have in place proper systems (including documentation systems) for maintaining the quality of services they perform.

Applicability of the Guidelines on Peer Review

a. Whenever a peer review is mandated;

b. Whenever a peer review is requested; and

c. Whenever a peer review is conducted.

Composition of the Peer Review Board

The Board shall comprise of:

a. Chairman;

b. Vice-Chairman; and

c. 7 Members (out of this, 4 shall be members of council)

Peer Reviewer –

• As per the guidelines, any Member of the ICSI may be a Peer Reviewer, provided he possesses at least 10 years of post-membership experience and is currently in whole time practice as a Company Secretary at the time of application for empanelment as a Peer Reviewer. The experience of at least 10 years prescribed may be in employment or in practice or a combination of both, but he/she needs to have COP at the time of application. The application is put through a verification process in the Institute, and on empanelment, the name of the Peer Reviewer is displayed on the website.
• He/ She needs to be well versed with certain basic requirements viz. ICSI standards, guidance notes, notifications, guidelines, code of conduct, and as well be a friend, a guide, appreciative of good practices of the P.U. and also at the same time be in a position to suggest areas of improvement.
• Since reviewers needs to be fully familiar with all procedures, prescriptions, guidelines and other decisions as may be issued by the Board from time to time, the institute has undertaken training programmes for reviewers and training modules for Reviewers are also under preparation in this regard.
• Peer Reviewers are expected to maintain strict secrecy and confidentiality while carrying out any Peer Review. They are required to file a Confidentiality Statement before commencement of the Peer Review. Breach of these conditions may tantamount to professional misconduct as defined under Section 22 of the Company Secretaries Act, 1980.

• Reviewer is allowed to take assistance from any one Qualified Assistant who should be a member of ICSI and have undergone the required training which is considered appropriate by the board in terms of clause 15.1 of the guidelines
• Reviewer needs to maintain working paper for a period as stipulated by the Board.
• The reviewer, by virtue of carrying out the peer review shall not incur any liability other than the liability arising out of his own conduct under the Code of Conduct under the Company Secretaries Act, 1980 and Regulations.

Scope:

The Review shall focus on:

• Compliance with Technical Standards.
• Quality of Reporting or Attestation services.
• Office systems and procedures with regard to compliance of services including appropriate infrastructure.
• Training and capacity building Programs for staff (particularly, the Apprentice Trainees)

The Review would be in respect of the following services:

1. Annual Returns Certified/Signed under Companies Act, 2013

2. Certificates Issued under Regulation 40 (9) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

3. Secretarial Audit Reports issued Section 204 of the Companies Act, 2013 / Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

4. Annual Secretarial Compliance Reports under SEBI (LODR) Regulations, 2015

5. Internal Audits under Section 138 of the Companies Act, 2013

6. Audit Reports issued under Clause 76 of SEBI (Depositories & Participant Regulations) 2018

7. Certificate issued under Regulation 56 of LODR Regulation 34(3) read with Schedule V, Para C, Clause (b) (i)

8. Compliance Certificates issued under Clause E, Schedule V of SEBI (LODR) Regulations, 2015

9. Internal Audit of Registrar and Share Transfer Agent (RTA) under SEBI Circular No. SEBI/HO/MIRSD/DOP1 /CIR/P/2018/73 dated 20^th April, 2018 & Internal Audit of Credit Rating Agencies under SEBI Circular No. SEBI/MIRSD/CRA/Cir-01/2010

10. Issuance of Internal Audit Certificate for operations of the Depository Participants

11. Half yearly bank due diligence certificates issued

Records of how many years are subject to Peer Review by the Reviewer? 

The Engagement records of immediately preceding financial Years shall be subject to peer review.

Advantages of the Peer Review to the Practice Unit (PU)

A. Enhances the Attestation quality, Audit Services and Credibility

B. Provides competitive advantage and a forum for Guidance and knowledge sharing.

Apart from this, a Peer Reviewed Unit is entitled to get additional 5 Secretarial Audits / Annual Secretarial Compliance Reports, per partner / PCS.

PEER REVIEW PROCESS

It encompasses a wide range of activities such as empanelment of peer reviewers, selection of the P.U, the Review Process, reporting, etc.  A brief summary of the various steps involved is presented below:

Empanelment of peer reviewers

• Eligible members are encouraged to get themselves empanelled with the Institute.
• After scrutiny of the application the Board issues the empanelment letter.
• Members against whom Disciplinary proceedings are pending or who have been found guilty of misconduct are not eligible to be empanelled as a Peer Reviewer
• Office bearers of the Council / Regional Councils / Managing Committee of Chapter are not empanelled as a Peer Reviewer till the time they are in office
• The format of the application for empanelment can be downloaded from the relevant webpage of the Peer Review Board at the ICSI portal www.icsi.edu  https://www.icsi.edu/media/webmodules/Peer%20Reviewers%20Empanelment%20form.pdf
• Before accepting to undertake a Peer Review, the Reviewer and any other Authorised Assistant who may assist him in the Peer Review, are required to sign this Statement of Confidentiality and shall send the same to the Peer Review Board. This statement of Confidentiality should be renewed every year.

Selection of P.U.

 The Board shall identify the P.U to be peer reviewed by a tested random selection method. If a P.U. opts for review on a voluntary basis, he is free do so. Once selected for, it is mandatory to offer themself for Peer Review.

Intimation to P.U. and Choice of Reviewer 

 The Board will notify the selected P.U. of the impending Peer Review. A questionnaire will be sent to him for completion and return to the Peer Reviewer, which will give an indication of the size of the P.U, professional assignments undertaken, staffing pattern and composition, etc. The P.U. is also required to furnish details of attestation services undertaken by him. The completed questionnaire will help the Peer Reviewer to plan his approach to Peer Review. The names of three Reviewers will be suggested to the P.U. and an option will be provided to the P.U. to select one of them. If the Peer Reviewer would like to have Reviewers from another State/Region and none of the reviewers as identified by the Board for the P.U. are from outside the place of business of the P.U. then the P.U. may make a special request to the Board to provide names of reviewers from outside the State/Region where the practice unit has its/his place of business. In such cases, the extra costs to be incurred by way of TA/DA shall be borne by the P.U.

Periodicity –

Clause No. 13.1 of the Guidelines provides that the peer review of every practice unit should be mandatorily carried out at least once in a block of five years. However, if the Board so decides or if the P.U so requests, peer review can be conducted at shorter intervals.

METHODOLOGY TO BE FOLLOWED BY REVIEWER:

(a) Offsite review: Studying the information given by the PU in the Questionnaire (refer to annexure IV on icsi.edu)

(b) Onsite Review:

• • Verification of information given by the PU. Test checks in respect of attestation assignments handled by the PU.
  • Interaction with the staff & trainees of PU should be a part of the peer review.
  • Calling for the records in respect of the client maintained by the PU to verify whether proper systems and procedures have been followed.

Cost of Peer Review:

• Cost for reviewer and his qualified assistant(s) as may be decided by the Board from time to time, shall be borne by the Practice Unit.
• In case the Peer Review has been requested by client / company, the cost shall be borne by such client / company.
• Same rate shall apply to second review also.
• Each branch / office under review would be considered separately.
• If the Council / Government or any regulatory body requests the Board for conduct of peer review of any Practice Units (PUs), then costs shall be borne by PU.
• The cost of Peer Review shall be paid by the PU directly to the Reviewer within 30 days from the receipt of Invoice raised by the Peer Reviewer

Obligations:

The Practice Unit under review shall provide access to any record or document as may be asked for by the reviewer. But, Reviewer cannot take any document or record alongwith, not permitted to do so and P.U. can deny the same.

Reporting: Three stage process – Review Framework

Planning

• Intimation
• Asking for further information be Reviewer.

Execution

• Sample of Attestation service engagements
• Confirmation of Visit
  • Initial meeting
  • Compliance Review – General Controls
  • Selection of Attestation services engagements to be reviewed
  • Review of record (The reviewer may adopt a compliance approach or substantive approach or a combination of both for the review)

Reporting

• Preliminary Report of Reviewer- in case the Reviewer finds some deficiency in the systems and procedures adopted by PU. Response shall be given within 21 days;
• Interim Report- In case reviewer is not satisfied with the reply of the PU, the reviewer shall submit his Interim Report to the Board.
• Final Report of Reviewer.
• The Board after it deems fit, issue Peer Review Certificate to the PU ,or, can make recommendations to PU concerned to adhere the Technical Standards; issue instructions to the reviewer to carry out, within such period (not earlier then 6 months), a further Peer Review; may specify in the instructions issued the matters that needs to be reviewed.
• The validity of the Peer Review Certificate is five years from the date of its issue. However, in case the PU is being reviewed within two year of its incorporation, the validity shall be two years.

* The reviewer shall not communicate any Report(s) unless the examination of such Report(s) & related records has been made by him or by a Qualified Assistant of his firm?

Composition of Reviewer’s Report-

The basic components of a report are scope, Reference to the quality control standards, Limitations if any, reference to the preliminary report if any, description of why modified report is required, instead of clean report. Also, reviewer can give qualifications in his/her report.

• STATEMENT OF CONFIDENTIALITY is placed as Appendix III on Manual on  https://www.icsi.edu/home/
• The fact that you have been Peer Reviewed does not provide immunity from Disciplinary Action

DISPUTE RESOLUTION :

• In case of dispute between Peer reviewer and Peer Reviewee, settlement can be done by making a written request to Peer Review Board. An appeal can be made against the order of the Peer Review Board to the Council of ICSI.