February 09, 2022
All Mutual Funds (MFs)/
Asset Management Companies (AMCs)/
Trustee Companies/ Board of Trustees of Mutual Funds/
Association of Mutual Funds in India (AMFI)
Sir / Madam,
Currently, the requirement for an Audit Committee is at the level of trustees of Mutual Funds. The working group constituted for the purpose of the regulatory revamp exercise of SEBI (Mutual Funds) Regulations, 1996 and various circulars issued thereunder suggested that an Audit Committee may be constituted at AMC level. The agenda was discussed in the Mutual Fund Advisory Committee (MFAC) and it was recommended that the AMC of mutual fund should constitute an Audit Committee.
2. In this regard, taking into account the recommendation of MFAC and the feedback received from the industry, it has been decided that the AMCs of mutual funds shall be required to constitute an Audit Committee. The role, responsibility, membership and other features of the Audit Committee of AMC are detailed in this circular.
3. Role : The Audit Committee of the AMC shall be responsible for oversight of financial reporting process, audit process, company’s system of internal controls, compliance to laws and regulations and other related process, with specific reference to operation of its Mutual Fund business. In this regard, the Audit Committee shall, inter-alia, have the following mandates:
3.1. To review the financial reporting processes, the system of internal controls and the audit processes for the Mutual Fund operations of the AMC ;
3.2. To ensure that the rectifications, if any, suggested by internal and external auditors, etc. are acted upon.
4. Membership :
4.1. The Audit Committee of AMC shall have minimum three directors as members.
4.2. At least two-third members of the Audit Committee shall be independent directors of AMC. If two-third of the total strength results into fraction, then higher number after rounding up shall be considered.
4.3. The members of the Audit Committee will be appointed by the Board of Directors of AMC.
4.4. All members of Audit Committee shall be persons with ability to read and understand the financial statement and at least one member shall have experience and background in finance and accounts.
4.5. The Chairperson of the Committee shall be an independent director, with adequate experience in the areas of finance and financial services.
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