We have been receiving multiple questions related to Compliance audit requirement by SEBI Registered Investment Adviser. Based on that we have attempted to capture some of the common questions.
Q 1. What is Compliance Audit?
Ans: Basically Compliance Audit is checking of the compliances followed by the Investment Advisers as stated under SEBI (Investment Advisers) Regulations, 2013.
Q 2. Is it different from Annual Accounts Audit/Tax Audit done by CA?
Ans: Yes, it is way different from annual accounts audit or tax audit which is done by a Chartered Accountant. In accounts/tax audit the financials of the Organisation is checked whereas in Compliance Audit, compliances of the SEBI Act and Regulations are being checked such as KYC, Risk Profiling, Suitability Assessment of clients, Client agreements, records to be maintained by Investment Adviser, policies, procedures related to daily conduct of the Investment Adviser, etc.
Q 3. Is it required to conduct by an Investment Adviser who is registered in individual capacity?
Ans: Yes, as per Regulation 19(3) of SEBI Investment Advisers Regulations, 2013, an Investment Adviser is required to conduct Compliance Audit, irrespective of fact that whether he is individual or a Corporate Body.
Q 4. Filings done on SEBI Intermediary Portal by the Investment Advisers will suffice with the requirement of Compliance Audit?
Ans: No, filings done on SEBI Intermediary Portal will not suffice with the requirement of Compliance Audit, as it is merely a reporting done by the entity to the SEBI not the Audit, which is required to be done by an Independent Professional.
Q 5. Does SEBI asks for Compliance Audit Report?
Ans: Yes, SEBI has power to inspect the documents and call upon any information from Investment Adviser. While carrying out inspection SEBI asks for Compliance Audit Report. Further SEBI has mentioned the non-compliance of Compliance Audit in an Order passed against Tradebizz Research dated 22nd August, 2019.
Q 6. Is there any requirement of submitting Compliance Audit Report to SEBI?
Ans: As of now there is no requirement of mandatorily submitting the report to SEBI. But SEBI in its Consultation paper issued on January 15, 2020 has specified that post completion of Compliance audit, Investment Adviser must report the adverse findings along with action taken thereof to SEBI within a period of one month from the date of the audit report i.e. not later than July 31st of each year for the previous financial year.
Q 7. What is the last date for Compliance Audit?
Ans: SEBI has specified in a Consultation Papers issued on October 7, 2016 and January 15, 2020 that Compliance Audit shall be completed within 3 months from the end of Financial Year i.e. till 30th June.
Author Bio
After going thru all the compliance issued by SEBI it looks like the tribe of investment advisors is endangered. Almost impossible do business with inspector raj is back. Most rules are so confusing that no matter how compliance you thing you are always at the mercy of SEBI.
No Shivam, your perception here is not correct. We agree that SEBI has made compliances more strict but it is not impossible to follow the Compliances and also run the business.
Many of our clients have already streamlined their process in line with the SEBI Regulations and and are happily following it and also making good business out of it.
Thanks for the info.
Hello,
I want to know further in it ? Please do share your contact details.