New norms for internal audit

Sebi also plans self-regulatory model for wealth managers

 The decision to give a two-year extension to the firm was taken at the last Board meeting of Sebi. The earlier guidelines provided that Sebi could hire an accounting firm for a maximum term of three years.

Chokshi & Chokshi were appointed as Sebi’s internal auditors for 2008-2009 and were re-appointed for two years successively. The term was to expire on March 31, 2011 after completion of three years. The Audit Committee of Sebi had recommended the firm be reappointed for a further period of two years. The decision is aimed at ensuring “independence and continuity” of the auditors, an official said, adding that Sebi may henceforth follow a policy whereby internal auditors are appointed for a period of three years extendable for a further period of up to two years.

Toll-free helpline

To resolve investors’ grievances and spread financial literacy, Sebi will also set up a toll free helpline to respond to queries of investors and help track the status of their complaints.

The investors, according a strategic action plan approved by Sebi earlier, will be able to communicate in their own languages. The investor awareness and education plan also includes a web-based centralised investor grievances tracking system to help investors track their complaints.

Besides, Sebi will launch a media campaign to demystify the securities market for investors, through films, and advertisements.

Self regulation model

In its new set of rules for an estimated $1 trillion wealth management industry, Sebi is planning to set up an intermediary regulatory body with representation from the wealth managers themselves. The SRO model, where the wealth managers or investment advisors would be asked to develop a stringent code of conduct in consultation with Sebi, would be complemented with stern penalty measures for erring entities. Sebi would provide an initial funding of Rs 10 crore for setting up of this SRO for wealth managers, after which the industry would have to pool in their own resources.

In the proposed self-regulatory model, Sebi will put the onus entirely on wealth managers for compliance to the regulations and the new entity to be created under Sebi’s guidance would work as the first-stage regulator as also market development authority, a senior official said. The decision to set up a self-regulatory organisation for wealth managers has been taken with a twin objective of regulating them without hampering the growth prospects of this burgeoning segment of financial services sector. The new rules would cover entities offering wealth management or investment advisory services across various asset classes irrespective of the different financial markets.

These would include stocks, commodities, fixed deposits, derivatives, insurance, mutual funds, private equity, pension funds as also alternative investment products such as funds investing in art works, antiques, coins and stamps.

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