SEBI Expands Audit Horizon: Cost Accountants Granted Authority to Conduct Annual Compliance Audits for Investment Advisers
The regulatory landscape for financial intermediaries in India is continuously evolving to ensure greater transparency, enhanced investor protection, and robust operational compliance. In a significant regulatory development, the Securities and Exchange Board of India (SEBI) has officially widened the pool of professionals authorized to scrutinize the regulatory adherence of registered advisory entities. Through a pivotal circular issued on March 25, 2026, the capital markets regulator has amended its existing framework, explicitly empowering members of the Institute of Cost Accountants of India (ICMAI) to execute the mandatory annual compliance audits for Investment Advisers (IAs).
This strategic modification to the regulatory rulebook not only democratizes the compliance ecosystem by including Cost Accountants but also ensures that advisory firms have a broader spectrum of qualified professionals to choose from when fulfilling their statutory obligations.
Contextual Background: The Master Circular and Previous Framework
To comprehend the magnitude of this regulatory shift, it is essential to examine the foundational guidelines governing advisory entities. SEBI had previously issued a comprehensive Master Circular for Investment Advisers on February 06, 2026. This consolidated document served as the ultimate repository of all instructions, operational directives, and reporting obligations applicable to registered IAs operating within the Indian financial markets.
Under the stipulations of the original Master Circular—specifically outlined in Paragraph 31.2 of Chapter VII—the authority to conduct the annual compliance audit was restricted. Only practicing professionals who were registered members of either the Institute of Chartered Accountants of India (ICAI) or the Institute of Company Secretaries of India (ICSI) were legally permitted to verify an IA's compliance with the SEBI (Investment Advisers) Regulations, 2013.
Following formal representations from the ICMAI and recognizing the specialized expertise possessed by Cost Accountants in financial scrutiny and regulatory compliance, SEBI decided to recalibrate its stance. The regulator acknowledged that Cost Accountants are equally equipped to assess the intricate compliance requirements mandated under Regulation 19(3) of the SEBI (Investment Advisers) Regulations, 2013.
Key Amendments Introduced by the March 2026 Circular
The latest circular introduces precise textual replacements to the existing Master Circular, effectively rewriting the compliance protocols for Investment Advisers. The modifications are designed to seamlessly integrate ICMAI members into the regulatory audit framework.