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SEBI plans forensic audit of mutual funds

February 12, 2023

The Securities and Exchange Board of India is expected to carry out an extensive audit of all 44 mutual funds, sources told CNBC-TV18. While SEBI does conduct audits annually, sources at some of the top mutual fund houses suggest that this time the audit will be an extensive exercise.

In this regard, SEBI had also put out an advertisement asking for expression of interest from forensic auditors in conducting an audit of mutual funds, asset management companies, trustee companies and board of trustees. According to sources, the audit will focus on due diligence and risk management of mutual fund houses.

“The forensic audit is happening for the first time at mutual funds. The audit will be done using data-based analytical tools and extensive data searches”, said a source at a top mutual fund house who did not wish to be named.

Sources say SEBI has been planning on such extensive audits for some time to ensure safety of investor money. “SEBI has been under pressure for sometime as questions have been raised about practices in mutual funds after the Axis MF case emerged. SEBI has also been under pressure after the Adani case recently,” said a mutual fund manager, requesting anonymity.

There have been reports that SEBI teams have confiscated laptops of some mutual fund industry officials. However, mutual fund managers have refuted these claims.

Mutual funds have been under the radar in the last two years after unethical practices at Franklin Templeton and Axis Mutual Fund came to light. SEBI has also intensified its drive against alleged violations of front-running norms as well. According to reports, raids have been carried out on certain mutual funds.


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