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.

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