The Securities and Exchange Board of India (SEBI) is planning to introduce tightened norms governing chartered accountants, company secretaries, cost accountants, valuers and third-party individuals hired by the listed companies to audit financial results. The market regulator is proposing these norms to take action against erring fiduciaries. The market regulator said in a consultative paper: “There are certain fiduciaries such as practicing chartered accountants, company secretaries, cost accountants, valuers and monitoring agencies which are neither registered nor regulated by the Sebi.”
The market regulator also said: “As per the various SEBI Regulations, they are engaged by the issuers, intermediaries, pool investment vehicles, investor in the securities market, etc. to issue certificates or reports as required under the respective regulations.”
The recent move by the market regulator comes after various cases of auditing issues and bank fund diversion by listed companies was reported in the last few months. As of now the regulator has no direct control over such lapses in auditing. “These fiduciaries periodically conduct audit of the books of accounts and issue compliance certificates as to whether the intermediary has maintained the required net-worth, whether risk management systems are in place, whether the intermediary has a robust mechanism for redressal of investor grievances or maintain records as per the regulations etc,” Sebi paper said.
As to the Sebi paper, the draft regulations proposes to amend various regulations to provide that when a fiduciary undertakes any engagement or assignment under the securities laws or investors in securities and issues any certificate and report, such a fiduciary should ensure that it is true in all material respects. “The board, if after making or causing to be made an inquiry or investigation, is satisfied that the fiduciary has submitted false certificate or report or has violated any of the provisions of these regulations, the board may take appropriate action under the concerned securities laws against the fiduciary, its engagement partner or director,” it said.