Securities and Exchange Board of India (SEBI) in its recent Circular for Investment Advisers dated 23rd September, 2020 titled “Guidelines for Investment Advisers” stated that, as per Regulation 19 (3) of the amended Investment Adviser Regulations, Investment Advisers shall ensure that Annual Audit in respect of compliance of SEBI (Investment Advisers) Regulations, 2013 and circulars issued thereunder shall be conducted.

Further, it was also stated that the said Compliance Audit shall be completed within six months from the end of each financial year i.e. by 30th September, 2020.

SEBI in the said Circular also stated that if there are any adverse findings in the Compliance Audit, then the same shall be reported to the respective SEBI office along with the Action Taken Report duly approved by the individual IA/management of the non-individual IA, within a period of one month from the date of the Audit Report but not later than October 31st of each year for the previous financial year starting with the financial year ending March 31, 2021.

SEBI has not just mandated the Compliance Audit but also has conditioned strict timelines for completing the said Compliance Audit.

So, there might be few questions which might arise for Investment Advisers, so let’s answer them:

What we would be checking in the Compliance Audit?

The answer stands out to be very simple that we will be checking all (each and every) compliances as per the SEBI Regulations in detail. We can list down the few, such as:

  • Qualification and certification requirements of the Investment Advisers, its Principal Officers and persons associated with advice.
  • Net-Worth criteria.
  • Risk Profiling Questionnaire and risk assessment done of every client and its consent obtained.
  • Client Agreements
  • All the relevant policies and procedures.
  • Communication records
  • Details of communication channels
  • Details of Complaints
  • And many other compliances

What shall be done after the completion of the Compliance Audit?

After the completion of the said Audit, you will be provided with the duly signed Compliance Audit Report which you may submit it to the SEBI.

If there are any adverse remarks in the Audit Report, then the Auditor will intimate the same to the Investment Adviser or to its management. Then the management can take action on that non-compliances and based on that Action Taken Report would be prepared, which would be submitted to the SEBI along with the Audit Report.

Till when the said Report can be submitted to the SEBI?

It shall be submitted to the SEBI within one month from the date of the Compliance Audit.

Will it be submitted to the SEBI head office?

No, it would be submitted to the local office, where the registered office of the Investment Adviser is located.

What if there are no adverse remarks in the report?

Then in that case Audit Report would not be submitted to the SEBI. But Investment Adviser shall keep it in its records as SEBI may ask Audit Report from the Investment Adviser at any point of time.

By when Investment Adviser shall get the Compliance Audit conducted?

Within 6 months from the end of Financial Year i.e. by 30th September, 2020.

At last the most important question…

Why an Investment Adviser shall choose us for the Compliance Audit?

We are having the experience of more than 5 years in this field and have a good client base who rely upon us. You can also go through our testimonial page;

Further, we won’t be just issuing Compliance Audit Report to you, but we will also have a discussion regarding compliances and also will be guiding you in detail regarding how better you can manage the compliances. We will also provide you relevant policies and procedures if you are not having the same.

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June 2021