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SEBI Orders Systems Audit of MFs

The market regulator wants to shine the transparency torch in the innermost recesses of fund houses’ workings

In yet another effort under the umbrella categorization of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market, the Securities and Exchange Board of India (SEBI) has ordered the mutual fund industry to have a systems audit conducted by an independent CISA/CISM auditor at least once in two years.

To ensure a comprehensive effort from fund houses on this order, SEBI said that it should encompass, “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 (NAVs), financial accounting and reporting system for the asset management companies (AMCs), 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.”

The report thereby generated is to be placed before the mutual fund trustees, which thereafter, will be handed over to SEBI.
For the financial years April 2008 – March 2010, the systems audit should be completed by September 30, 2010, said a SEBI circular.