prpri System Audit framework for Mutual Funds / AMCs System Audit framework for Mutual Funds / AMCs

Securities and Exchange Board of India

CIRCULAR

SEBI/HO/IMD/DF2/CIR/P/2019/57

April 11, 2019

All Mutual Funds/
Asset Management Companies (AMCs)/
Trustee Companies/ Boards of Trustees of Mutual Funds/
Registrar and Transfer Agents/
Association of Mutual Funds in India (AMFI)

Dear Sir/Madam,

Sub: System Audit framework for Mutual Funds / Asset Management Companies (AMCs)

1. Requirement of system audit for mutual funds was introduced vide SEBI Circular SEBI/IMD/CIR No.9/176988/2009 dated September 16, 2009.

2. Considering the importance of systems audit in technology driven asset management activity and to enhance and standardize the systems audit, revised guidelines in this regard are placed at Annexure 1. These guidelines are indicative and not exhaustive in nature. On the date of issuance of this circular, SEBI Circular SEBI/IMD/CIR No.9/176988/2009 dated September 16, 2009 shall stand rescinded.

3. The aforementioned audit should be encompassing audit of systems and processes, inter alia, related to examination of integration of front office system with the back office system, fund accounting system for calculation of net asset values, financial accounting and reporting system for the AMC, Unit-holder administration and servicing systems for customer service, funds flow process, system processes for meeting regulatory requirements, prudential investment limits and access rights to systems interface.

4. Mutual Funds / AMCs are advised to conduct systems audit on an annual basis by an independent CISA / CISM qualified or equivalent auditor to check compliance of the provisions of this circular.

5. Mutual Funds / AMCs are further advised to take necessary steps to put in place systems for implementation of this circular. The exception report as per Annexure 2 should be placed before the Technology Committee for review. The Technology Committee after review shall place the same before the AMC & Trustee Board. Thereafter, exception observation report along with trustee comments starting from the financial year April 2019 – March 2020 should be communicated to SEBI within six months of the respective financial year. Further, System Audit Reports shall be made available for inspection.

6. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,
Jyoti Sharma
General Manager
Investment Management Department
Email: jyotis@sebi.gov.in

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