Eligibility of Cost Accountants to conduct Annual Audit
Clarification on Eligibility of Members of the Institute of Cost Accountants of India to Conduct Annual Audit of Investment Advisers
- The Securities and Exchange Board of India (SEBI) issued a Master Circular for Investment Advisers dated February 06, 2026, which consolidates various directions, instructions, and reporting requirements applicable to Investment Advisers (IAs).
- Paragraph 31.2 of Chapter VII of the Master Circular currently states that the annual compliance audit of an Investment Adviser may be conducted by a member of the Institute of Chartered Accountants of India (ICAI) or the Institute of Company Secretaries of India (ICSI) to verify adherence to the provisions of the SEBI (Investment Advisers) Regulations, 2013 and related circulars.
- SEBI has received a representation from the Institute of Cost Accountants of India (ICMAI) seeking clarification regarding the eligibility of its members to conduct such audits. Considering that Regulation 19(3) of the IA Regulations recognizes Cost Accountants for conducting annual audits of Investment Advisers, it has been decided to amend the relevant provisions of the Master Circular to explicitly include members of ICMAI.
- Consequently, paragraph 31.2 of Chapter VII of the Master Circular shall be substituted with the following:
Annual Compliance Audit and Reporting
In accordance with Regulation 19(3) of the SEBI (Investment Advisers) Regulations, 2013, every Investment Adviser shall conduct an annual audit to verify compliance with the provisions of the IA Regulations and the circulars issued thereunder. Such audit shall be carried out by a member of the Institute of Chartered Accountants of India (ICAI), the Institute of Company Secretaries of India (ICSI), or the Institute of Cost Accountants of India (ICMAI).The audit must be completed within six months from the end of the relevant financial year. The Investment Adviser shall submit the audit report along with details of any adverse observations and the corrective measures taken, if applicable. The submission must be approved by the individual Investment Adviser or the management of a non-individual Investment Adviser.
This report should be filed within one month from the date of the audit report, and in any case not later than October 31 of the relevant year for the preceding financial year.
- Further, paragraph 1(i)(i) of Chapter I of the Master Circular shall be revised as follows:
Investment Advisers shall maintain an annual certificate issued by a member of ICAI, ICSI, or ICMAI, or by an auditor, confirming compliance with the client-level segregation requirements prescribed under Regulation 22 of the IA Regulations.
The certificate must be obtained within six months from the close of the financial year and shall form part of the compliance audit conducted under Regulation 19(3).
- The provisions of this circular shall come into effect from the date of its issuance.
- This circular is issued by SEBI in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992, read with Regulations 19(3) and 22(5) of the SEBI (Investment Advisers) Regulations, 2013, with the objective of safeguarding investor interests and ensuring proper regulation and development of the securities market.
- The circular has been issued with the approval of the competent authority.
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