Annual compliance audit is a critical regulatory requirement with strict timelines. This article explains the audit timeline, submission deadlines, and compliance obligations.
The Regulatory Framework
Audit Requirement
Portfolio managers must complete the annual compliance audit within six months from the end of each financial year and submit a compliance audit report to SEBI within a period of one month from the date of the audit report.
Performance Audit Requirement
Portfolio managers are required to submit audit reports on firm-level performance data to SEBI within sixty days from the end of each financial year.
Key Deadlines
Financial Year End
The financial year for portfolio managers ends on March 31 of each year. All audit-related timelines are calculated from this date.
Audit Completion Deadline
The annual compliance audit must be completed within six months from the end of each financial year. This means the audit must be completed by September 30 for the financial year ending March 31.
Audit Report Submission Deadline
After completion, the audit report must be submitted to SEBI within a period of one month from the date of the audit report, but no later than October 31 for the preceding financial year.
Performance Audit Report Deadline
Portfolio managers are required to submit audit reports on firm-level performance data to SEBI within sixty days from the end of each financial year.
Summary of Deadlines
| Requirement | Completion Deadline | Submission Deadline |
|---|---|---|
| Annual Compliance Audit | September 30 (within 6 months of March 31) | October 31 (within 1 month of audit completion) |
| Performance Audit | September 30 (within 6 months of March 31) | 60 days from end of financial year |
| Confirmation of Compliance | - | 60 days from end of financial year |
Compliance Requirements
Audit Report Contents
The audit report must specify:
- Each provision of the PMS Regulations
- Compliance status for each requirement
- Any adverse findings
- Action taken to address findings
Publication Requirements
Portfolio managers must:
- Publish status of compliance audit report on website
- Publish adverse findings of audit, if any, along with action taken
- Provide compliance audit report to clients
Record Keeping
Audit reports and related documents must be preserved for a minimum period of five years.
Consequences of Non-Compliance
Regulatory Action
Failure to submit audit reports within the prescribed timelines can result in:
- Enforcement action by SEBI
- Monetary penalties
- Restrictions on onboarding new clients
Recent Enforcement
SEBI has taken action against portfolio managers who failed to submit mandatory periodic reports, including net worth certification, corporate governance reports, and portfolio manager compliance reports.
Standardisation of Audit
Uniform Approach
SEBI has decided to standardise the way portfolio managers audit performance data on an annual basis. This ensures consistency across the industry and enables better comparison.
Terms of Reference
APMI, in consultation with SEBI, has specified standardised Terms of Reference (ToR) for the audit of firm-level performance data.
Expert Legal Guidance
Anuj Desai & Associates provides expert legal advisory services on annual compliance audit compliance for portfolio managers. Our securities law experts help clients meet audit deadlines, prepare compliant reports, and ensure regulatory compliance. Contact us for guidance on annual compliance audit and other regulatory matters.