Section 2(zb) “cost accountant” means a cost accountant as defined in clause (b) of subsection
(1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds
a valid certificate of practice under sub-section (1) of section 6 of that Act;
Section 7(b) a declaration in the prescribed form by an advocate, a Chartered
Accountant, Cost Accountant or Company Secretary, who is engaged in the formation
of the company, or by a person named in the articles as a director, manager or Secretary
of the company, that all the requirements of this Act and the rules made thereunder in
respect of registration and matters precedent or incidental thereto have been complied
with.
Section 131(3) Where a company includes the particulars relating to items of cost in the books of
account in pursuance of a resolution passed by the company, the audit of cost records as
contained in the books of account of the company shall be conducted by a Cost Accountant
in practice who shall be appointed by the Board on such remuneration as may be determined
by the members in such manner as may be prescribed:
Provided that no person appointed under section 123 as an auditor of the company
shall be appointed for conducting the audit of cost records.
Section131 -4.Provided that the report on the audit of cost records shall be submitted by the Cost
Accountant in practice to the Board of Directors of the company.
266. (1) The Company Liquidator may, with the sanction of the Tribunal, appoint one
or more chartered accountants or company secretaries or cost accountants or legal
practitioners or such other professionals as may be necessary to assist him in the performance
of his duties and functions under the Act.
Section 274 (4)(b)(b) may at his own cost employ chartered accountants or company secretaries
or cost accountants or legal practitioners entitled to appear before the Tribunal under
section 393, who shall be at liberty to put to him such questions as the Tribunal may
consider just for the purpose of enabling him to explain or qualify any answers given
by him.
(b) may at his own cost employ chartered accountants or company secretaries
or cost accountants or legal practitioners entitled to appear before the Tribunal under
section 393, who shall be at liberty to put to him such questions as the Tribunal may
consider just for the purpose of enabling him to explain or qualify any answers given
by him.
Tuesday, August 24, 2010
ICWAI Qualification for Appointment as Teaching Faculty in Universities
and Colleges in the Area of Management/Business Administration
University Grants Commission (UGC) has notified “UGC Regulations on Minimum
Qualifications for Appointment of Teachers and Other Academic Staff in
Universities and Colleges and Measures for the Maintenance of Standards in
Higher Education, 2010 vide its Circular No. F.3-1/2009 dated 30th June 2010.
The Regulations prescribe the minimum qualification for appointment of
teaching faculty in universities and colleges in the area of Management/
Business Administration. The qualifications specified for appointment of
Assistant Professor, Associate Professor and Professor in the above area and
Principal/Director/Head of the Institution include First Class Graduate and
professionally qualified Cost and Works Accountant among other
qualifications and subject to other requirements including qualifying
NET/SLET/SET as the minimum eligibility condition for recruitment and
appointment of Assistant Professors.
These regulations shall apply to every university established or incorporated by
or under a Central Act, Provincial Act or a State Act, every institution including a
constituent or an affiliated college recognised by the Commission, in
consultation with the university concerned under Clause (f) of section 2 of the
University Grants Commission Act, 1956 and every institution deemed to be a
university under Section 3 of the said Act.
The relevant extract of the notification is as follows:
MINIMUM QUALIFICATIONS FOR APPOINTMENT OF TEACHING FACULTY
IN UNIVERSITIES AND COLLEGES- MANAGEMENT/BUSINESS
ADMINISTRATION:
1. Assistant Professor:
I. Essential:
1. First Class Masters Degree in Business Management/Administration/in
a relevant management related discipline or first class in two year full
time PGDM declared equivalent by AIU/ accredited by the AICTE/UGC;
OR
2. First Class graduate and professionally qualified Chartered
Accountant/Cost and Works Accountant/Company Secretary of the
concerned statutory bodies.
II. Desirable:
1. Teaching, research, industrial and/or professional experience in a
reputed organization;
2. Papers presented at Conferences and/or published in refereed
journals.
2. Associate Professor:
i. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/in a relevant
management related discipline or first class in two years full time PGDM
declared equivalent by AIU/recognized by the AICTE/ UGC;
OR
First Class graduate and professionally qualified Chartered
Accountant/Cost and Works Accountant/Company Secretary of the
concerned statutory body.
ii. Ph.D. or Fellow of Indian Institute of Management or of an Institute
recognized by AICTE and declared equivalent by the AIU.
iii. A minimum of eight years’ experience of teaching/industry/ research/
professional at managerial level excluding the period spent for obtaining
the research degree.
OR
iv. In the event the candidate is from industry and the profession, the
following requirements shall constitute as essential requirements:
i. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/in a relevant
management related discipline or first class in two years full time PGDM
declared equivalent by AIU/recognized by AICTE/UGC,
OR
First Class graduate and professionally qualified Chartered
Accountant/Cost and Works Accountant/Company Secretary of the
concerned statutory body.
ii. A minimum of ten years experience of teaching/industry/research/
profession, out of which five years must be at the level of Assistant
Professor or equivalent excluding the period spent for obtaining research
degree. The candidate should have Professional work experience, which is
significant and can be recognized at national/international level as
equivalent to Ph.D. and ten years managerial experience in
industry/profession of which at least five years should be at the level
comparable to that of lecturer/assistant professor.
v. Without prejudice to the above, the following conditions may be
considered desirable:
a) Teaching, research, industrial and/or professional experience in a
reputed organization;
b) Published work, such as research papers, patents filed/obtained, books
and/or technical reports; and
c) Experience of guiding the project work/dissertation of PG/Research
Students or supervising R&D projects in industry.
3. Professor:
i. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/ in a relevant
discipline or consistently good academic record with at least 55% marks
(or an equivalent grade in a point scale wherever grading system is
followed) in two year full time PGDM declared equivalent by
AIU/recognized by the AICTE/UGC;
OR
First Class graduate and professionally qualified Chartered Accountant/
Cost and Works Accountant/Company Secretary of the concerned
statutory body.
ii. Ph. D. or Fellow of Indian Institute of Management or of an Institute
recognized by AICTE and declared equivalent by the AIU.
iii. A minimum of ten years’ experience of teaching/industry/research/
professional out of which five years must be at the level of Reader or
equivalent excluding the period spent for obtaining the research degree.
OR
iv. In the event the candidate is from industry and the profession, the
following shall constitute as essential:
1. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/ in a relevant
management related discipline or consistently good academic record with
at least 55% marks (or an equivalent grade in a point scale wherever
grading system is followed) in two years full time PGDM declared
equivalent by AIU/recognized by the AICTE/UGC.
OR
First Class graduate and professionally qualified Chartered Accountant
Cost and Works Accountant/Company Secretary of the concerned
statutory body.
2. The candidate should have professional work experience which is
significant and can be recognized at national/International level as
equivalent to Ph. D. and twelve years’ managerial experience in
industry/profession of which at least eight years should be at least at a
level comparable to that of Reader/Assistant Professor.
v. Without prejudice to the above, the following conditions may be
considered desirable:
i) Teaching, research, and/or professional experience in a reputed
organization;
ii) Published work, such as research papers, patents filed/obtained, books
and/or technical reports;
iii) Experience of guiding the project work/dissertation of PG/research
students or supervising R&D projects in industry;
iv) Demonstrated leadership in planning and organizing academic,
research, industrial and/or professional activities; and
v) Capacity to undertake/lead sponsored R&D consultancy and related
activities.
4. Principal/Director/Head of Institution
i. Qualification same as those prescribed for the post of professor in the
relevant discipline with a minimum of fifteen years’ experience of
postgraduate teaching/industry/research.
OR
ii. For candidates from Industry/Profession:
Qualification same as those prescribed for the post of Professor from
industry/profession stream with fifteen years’ experience of postgraduate
teaching/research out of which five years must be at the level or
Professor in the relevant discipline.
iii. Without prejudice to the above, the following conditions may be
considered desirable:
1. Administrative experience in senior level responsible position in the
Industry/Professional Institution.
For full text of the notification please visit the url:
http://www.ugc.ac.in/policy/revised_finalugcregulationfinal10.pdf
and Colleges in the Area of Management/Business Administration
University Grants Commission (UGC) has notified “UGC Regulations on Minimum
Qualifications for Appointment of Teachers and Other Academic Staff in
Universities and Colleges and Measures for the Maintenance of Standards in
Higher Education, 2010 vide its Circular No. F.3-1/2009 dated 30th June 2010.
The Regulations prescribe the minimum qualification for appointment of
teaching faculty in universities and colleges in the area of Management/
Business Administration. The qualifications specified for appointment of
Assistant Professor, Associate Professor and Professor in the above area and
Principal/Director/Head of the Institution include First Class Graduate and
professionally qualified Cost and Works Accountant among other
qualifications and subject to other requirements including qualifying
NET/SLET/SET as the minimum eligibility condition for recruitment and
appointment of Assistant Professors.
These regulations shall apply to every university established or incorporated by
or under a Central Act, Provincial Act or a State Act, every institution including a
constituent or an affiliated college recognised by the Commission, in
consultation with the university concerned under Clause (f) of section 2 of the
University Grants Commission Act, 1956 and every institution deemed to be a
university under Section 3 of the said Act.
The relevant extract of the notification is as follows:
MINIMUM QUALIFICATIONS FOR APPOINTMENT OF TEACHING FACULTY
IN UNIVERSITIES AND COLLEGES- MANAGEMENT/BUSINESS
ADMINISTRATION:
1. Assistant Professor:
I. Essential:
1. First Class Masters Degree in Business Management/Administration/in
a relevant management related discipline or first class in two year full
time PGDM declared equivalent by AIU/ accredited by the AICTE/UGC;
OR
2. First Class graduate and professionally qualified Chartered
Accountant/Cost and Works Accountant/Company Secretary of the
concerned statutory bodies.
II. Desirable:
1. Teaching, research, industrial and/or professional experience in a
reputed organization;
2. Papers presented at Conferences and/or published in refereed
journals.
2. Associate Professor:
i. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/in a relevant
management related discipline or first class in two years full time PGDM
declared equivalent by AIU/recognized by the AICTE/ UGC;
OR
First Class graduate and professionally qualified Chartered
Accountant/Cost and Works Accountant/Company Secretary of the
concerned statutory body.
ii. Ph.D. or Fellow of Indian Institute of Management or of an Institute
recognized by AICTE and declared equivalent by the AIU.
iii. A minimum of eight years’ experience of teaching/industry/ research/
professional at managerial level excluding the period spent for obtaining
the research degree.
OR
iv. In the event the candidate is from industry and the profession, the
following requirements shall constitute as essential requirements:
i. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/in a relevant
management related discipline or first class in two years full time PGDM
declared equivalent by AIU/recognized by AICTE/UGC,
OR
First Class graduate and professionally qualified Chartered
Accountant/Cost and Works Accountant/Company Secretary of the
concerned statutory body.
ii. A minimum of ten years experience of teaching/industry/research/
profession, out of which five years must be at the level of Assistant
Professor or equivalent excluding the period spent for obtaining research
degree. The candidate should have Professional work experience, which is
significant and can be recognized at national/international level as
equivalent to Ph.D. and ten years managerial experience in
industry/profession of which at least five years should be at the level
comparable to that of lecturer/assistant professor.
v. Without prejudice to the above, the following conditions may be
considered desirable:
a) Teaching, research, industrial and/or professional experience in a
reputed organization;
b) Published work, such as research papers, patents filed/obtained, books
and/or technical reports; and
c) Experience of guiding the project work/dissertation of PG/Research
Students or supervising R&D projects in industry.
3. Professor:
i. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/ in a relevant
discipline or consistently good academic record with at least 55% marks
(or an equivalent grade in a point scale wherever grading system is
followed) in two year full time PGDM declared equivalent by
AIU/recognized by the AICTE/UGC;
OR
First Class graduate and professionally qualified Chartered Accountant/
Cost and Works Accountant/Company Secretary of the concerned
statutory body.
ii. Ph. D. or Fellow of Indian Institute of Management or of an Institute
recognized by AICTE and declared equivalent by the AIU.
iii. A minimum of ten years’ experience of teaching/industry/research/
professional out of which five years must be at the level of Reader or
equivalent excluding the period spent for obtaining the research degree.
OR
iv. In the event the candidate is from industry and the profession, the
following shall constitute as essential:
1. Consistently good academic record with at least 55% marks (or an
equivalent grade in a point scale wherever grading system is followed) in
Master’s Degree in Business Management/Administration/ in a relevant
management related discipline or consistently good academic record with
at least 55% marks (or an equivalent grade in a point scale wherever
grading system is followed) in two years full time PGDM declared
equivalent by AIU/recognized by the AICTE/UGC.
OR
First Class graduate and professionally qualified Chartered Accountant
Cost and Works Accountant/Company Secretary of the concerned
statutory body.
2. The candidate should have professional work experience which is
significant and can be recognized at national/International level as
equivalent to Ph. D. and twelve years’ managerial experience in
industry/profession of which at least eight years should be at least at a
level comparable to that of Reader/Assistant Professor.
v. Without prejudice to the above, the following conditions may be
considered desirable:
i) Teaching, research, and/or professional experience in a reputed
organization;
ii) Published work, such as research papers, patents filed/obtained, books
and/or technical reports;
iii) Experience of guiding the project work/dissertation of PG/research
students or supervising R&D projects in industry;
iv) Demonstrated leadership in planning and organizing academic,
research, industrial and/or professional activities; and
v) Capacity to undertake/lead sponsored R&D consultancy and related
activities.
4. Principal/Director/Head of Institution
i. Qualification same as those prescribed for the post of professor in the
relevant discipline with a minimum of fifteen years’ experience of
postgraduate teaching/industry/research.
OR
ii. For candidates from Industry/Profession:
Qualification same as those prescribed for the post of Professor from
industry/profession stream with fifteen years’ experience of postgraduate
teaching/research out of which five years must be at the level or
Professor in the relevant discipline.
iii. Without prejudice to the above, the following conditions may be
considered desirable:
1. Administrative experience in senior level responsible position in the
Industry/Professional Institution.
For full text of the notification please visit the url:
http://www.ugc.ac.in/policy/revised_finalugcregulationfinal10.pdf
Notice
Dated: 6th April 2009
Sub: Internal Audit for stock brokers/trading members/clearing members
This is further to Exchange Notice October 29, 2008 wherein all the stock brokers/trading members/clearing members were directed to carry out complete internal audit on a half yearly basis by chartered accountants, company secretaries or cost and management accountants who are in practice and who do not have any conflict of interest. It was also informed that, the first internal audit period would be from October 1, 2008 to March 31, 2009.
Further, on the basis of SEBI letter No. MIRSD/DPS-I/PG/158174/09 dated March 23, 2009, the applicability, scope/guidelines of audit, format of audit report, audit certificate and the time limit for submission of audit report are given as Annexure 1, 2 and 3.
All stock brokers/trading members/clearing members are advised to ensure compliance with the above requirements.
Members are advised to submit the Audit Reports to the Surveillance Department of the Exchange on 4th Floor of the Exchange at 7, Lyons Range, Kolkata.
In case of any queries / clarification, the members may contact Manager Surveillance and DGM Surveillance.
Company Secretary and Financial Controller
Annexure – 1
INTERNAL AUDIT FOR STOCK BROKERS/TRADING MEMBERS/CLEARING MEMBERS
Applicability
Trading Members (Stock Brokers) and Clearing members are required to appoint an internal auditor for carrying out complete internal audit in all segments of the Exchange in which they are enabled for trading/clearing (wherein atleast a one/single trade have been executed or cleared by them) and submit a report to the Exchange on half yearly basis. The first half year period would start from October 01, 2008.
Who can conduct internal audit
Internal audit is required to be carried out by any Chartered Accountant, Company Secretary or Cost and Management Accountant who is in practice and who does not have any conflict of interest.
Scope/Purpose of Audit
The purpose of audit should be
(a) to ensure that the books of account, records and documents have been maintained in the manner required under Securities Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956, SEBI (Stock brokers and Sub-brokers) Regulations, 1992, Securities Contracts (Regulation) Rules, 1957, circulars issued by SEBI & Exchange, Bye laws of the Exchange including agreements, data security and insurance in respect of operations of trading member/clearing member.
(b) to ascertain whether adequate internal control systems, procedures and safeguards have been established and are being followed by the intermediary to fulfill its obligations under Securities and Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956, SEBI (Stock brokers and Sub-brokers) Regulations, 1992, Securities Contracts (Regulation) Rules, 1957, circulars issued by SEBI & Exchange, Bye laws of the Exchanges and with respect to data security and insurance in respect of operations of trading member/clearing member.
(c) to ascertain whether any circumstances exist which would render the intermediary unfit or ineligible for dealing in securities market.
(d) to ascertain whether the provisions of the securities laws and the directions and/or circulars issued there under by SEBI/Exchange have been complied with
(e) to ascertain, whether the provision of Bye-laws, notices, circulars, instructions or orders issued by stock exchanges have been complied with
(f) to inquire suo motu into such matters as may be deemed fit by the auditor in the interest of investors or the securities market
Submission of internal audit report
Internal auditor would submit the audit report to the Proprietor/Partners/Board of respective trading/clearing member. In case the trading member is a partnership firm or corporate entity, the report would be placed before the meeting of its management committee/Board of Directors. In all cases, the trading member shall forward the audit report along with para-wise/point wise comments to respective stock exchanges within 3 months from the end of the relevant half year audit period. The audit report may be combined across segments and activity (trading/clearing) for respective Exchanges.
The initial internal audit should be for the period commencing from October 1, 2008 till March 31, 2009 and the audit report together with para-wise/point wise comments should be submitted to the Exchange within 30th June 2009 and the subsequent audit reports with comments should be submitted to the Stock Exchange within 3 months from the end of relevant half year audit period.
Non-compliance relating to internal audit by the members
Non-submission of internal audit report as per the aforesaid guidelines shall be treated as non-compliance and suitable disciplinary action may be initiated against the concerned member/s. Where, in the opinion of the Exchange, the quality of the reporting is not satisfactory or the audit is not carried out in accordance with the aforesaid guidelines, the Exchange reserves the right to advise the concerned member/s to change the auditors and/or submit revised reports.
Annexure – 2
Areas to be covered in internal audit and areas on which comments needs to be incorporated in the report are given below
1. Client registration and documentation
Execution of KYC, MCA/TPA, and RDD – checks and balances in place
Whether KYC, MCA/TPA, RDD are executed in the prescribed formats & the same is executed before execution of trades for the client?
Whether UCC is allotted to the client & the same is uploaded to the Exchange with PAN
Whether all fields in KYC including client’s financial details are filled in properly?
Whether proper proof of identity, PAN and proof of address are taken with KYC form?
Whether any contravening clauses are included in MCA/TPA?
Whether in person verification of clients is done by the employees of the trading member only?
Whether date of verification, name and signature of the official who has done in-person verification and the member’s stamp incorporated in the client registration form?
Whether copies of all the documents executed by client are given to the respective clients?
Whether change in address, bank account or demat account is carried out on receipt of written request along with documentary proof from the respective client?
Whether client details including financial details are reviewed periodically and updated?
Verification of formats of KYC, MCA/TPA and RDD and attachments including proof of identity and address, as prescribed by SEBI/BSE
Verification that Contradictory clauses are not mentioned in KYC, MCA/TPA and RDD
Systems and procedures put in place by member for verification of PAN before opening account
Procedure followed by the member for informing UCC to the clients & uploading to the Exchange
Mechanism to ensure financial details of clients
Procedure adopted for in person verification of clients
Procedure adopted by relationship managers, if any, for procuring new clients
Delivery of copies of client registration documents to the clients
Storage of client registration documents and retrieval mechanism
Procedure adopted for obtaining clients’ consent for electronic contract notes
Periodic review of client related information and updation of the same in system
Verification of RDD/KYC/MCA/TPA of different types of clients
Acquaintance procedure for new clients
Applicable SEBI Circulars.
SEBI circular no. SMDRP/Policy/Cir-39/2001 dated July 18, 2001
SEBI circular no. SEBI/MIRSD/DPS-1/Cir-31/2004, dated August 26, 2004 & Regulation-7 D
SEBI circular no. MRD/DoP/SE/Cir- 35/2004 dated October 26, 2004
SEBI circular no. MRD/DoP/Cir- 05/2007 dated April 27, 2007
MIRSD/DPS-III / 130466 / 2008 dated July 02, 2008
2. Order management and risk management systems
Procedure adopted for receipt of orders from clients
Whether checks are in place to ensure that no unauthorized orders are executed from any of the terminals?
Whether control reports like orders executed away from market price, client-wise / scrip-wise / terminal-wise volumes / exposures are generated to monitor any manipulation or unwarranted activity?
In case of dormant accounts, are there any checks in place to ensure that in case the account is reactivated whether it is operated by the respective client only?
Whether initial and other margins are collected from respective clients in the prescribed form of funds, fixed deposit receipts, bank guarantees and approved securities with appropriate haircut?
Whether the member has a proper system for reporting the correct client margin collection, in Derivatives segment?
Verify whether the margin reported by the member to the Exchange in Derivatives segment is actually collected and available in the books of accounts of the member. In case of any irregularity observed, mention the instances wherein wrong reporting of margin collected from clients/trading members was observed.
Whether Risk Management System (RMS) includes policy on margin collection from clients/trading member and the RMS is documented?
Whether proper systems are in place to ensure timely collection for pay-in from the respective client as per settlement schedule?
Whether proper monitoring mechanism is in place to review long outstanding debit balances in clients’ accounts and recovery of the same?
Whether member has reported details of client funding, if any, to the exchange within prescribed time limit?
What are the sources of funds in case client funding is observed?
Whether all the institutional trades are routed through custodians by following Straight Through Processing (STP) ?
What are the reasons for institutional trades not being routed through custodians? Whether any specific pattern is observed for the same?
Whether member has obtained prior approval from the exchange before providing terminal to the clients under DMA facility?
Whether member has complied with regulatory requirements related to. DMA?
Mechanism for order management and execution
Procedure adopted for setting Limits at client level / Terminal level/Dealer level
Policy on Margin collection mechanism and the modes of margin money
Procedure adopted for reporting of client margin collection to Clearing House
Review of process adopted for monitoring / recovery of long outstanding debit balances
Procedure adopted for calculation & reporting client funding
Procedure for monitoring institutional trades not routed through custodians
Procedure adopted for providing Direct Market Access (DMA) facility
Applicable SEBI Circulars.
SEBI circular no. MRD/DoP/SE/Cir-07/2005 dated February 23, 2005
SEBI circular no. MRD/DoP/SE/Cir- 17/2005 dated September 02, 2005
Exchange Notice no. 20040420-12 dated April 20, 2004.
Exchange notice no. 20080417-24 dated April 17, 2008.
Exchange Notice No. 20051216-8 dated December 16, 2005
3. Contract notes, Client margin details and Statement of accounts
Procedure adopted for issuance of contract notes
Whether contract notes are sent within 24 hours of execution of trades and margin details are sent daily to respective clients and proof of delivery / dispatch is maintained?
Whether all prescribed details including name and signature of authorised signatory, dealing office details and brokerage are contained in contract note?
In case contract notes and margin details are sent in electronic form, whether log is maintained? Whether trail of bounced mails is maintained and physical delivery is ensured in case of bounce mails?
Whether member has complied with regulatory requirements related to. Electronic Contract Notes(ECN)?
Whether complete statement of accounts for funds and securities are issued on a quarterly basis to clients, with error reporting clause? Whether proof of sending the same is maintained?
Verification of format of contract notes issued
Verification of copy of contract note with Proof of dispatch/register of dispatch/logs maintained
Adherence to electronic contract note norms, if applicable
Procedure adopted for sending statement of accounts
Contents & periodicity of statement of accounts of funds and securities
Procedure adopted for sending margin details to clients
Procedure for maintaining acknowledgement / proof of delivery of contract notes/statement of accounts/margin details to the clients
Applicable SEBI Circulars.
Clause B(2) of Code of conduct for Stock Brokers specified under Regulation 7
SMD-1/23341 dated November 18, 1993
SMD (B)/104/22775/93 dated October 29, 1993
SMD/MDP/CIR/043/96 dated August 5, 1996
MRD/DoP/SE/Cir-20/2005 dated September 08, 2005
SEBI/DNPD/143542 /Cir-43/08 dated November 06, 2008
4. Dealing with clients’ funds and securities
Verification of details of cash receipts from / payments to clients, if any, observed during the audit period are to be given (mentioning any specific branch involved).
Whether cash dealings with clients are done by branches / sub brokers?
Whether banker’s cheque / demand draft are accompanied with written request from the respective client?
Whether pay-in or pay-out is received from or delivered to respective clients only?
Whether any instances were observed wherein pay-in / pay out was received from / made to account other than the respective client account? Whether systems are in place to ensure compliance in this regard by the member?
Whether collaterals of clients were pledged with banks / other entities for raising funds? If yes, details of such instances observed are to be given.
Whether funds raised by pledging client securities were utilised for respective client only? List of instances to be provided in case of non-utilisation of proceeds for respective client?
Whether client’s funds / securities are transferred to respective clients accounts within one working day of after the pay-out of the settlement?
Whether any instance of misutilisation of clients’ funds or securities is observed? If yes, give complete details of such instances
Whether bank book and register of securities are in alignment with bank statements and transaction statements provided by banks and depositories?
Whether dividend and other corporate benefits received on behalf of clients is paid/credited/passed on to the respective clients account ?
Verification of internal controls adopted by the member while accepting banker’s cheque / demand draft from clients
Procedure for ensuring that receipts and payment of funds/securities are from/to respective client only
Periodic Reconciliation of books of accounts
Verification of following books of accounts/records
- Register of Securities
- Bank Statements
- Depository accounts maintained by member
- Client ledgers
- Cash Book
- Bank Book
- Details of records of client securities pledged, if any.
- Underlying for any overdraft/loan account.
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/Cir- 33/2003/27/08 dated August 27, 2003
Code of conduct for Stock Brokers specified under Regulation 7 of SEBI (Stock Brokers and Sub brokers) Regulations, 1992.
SEBI circular no. MRD/DoP/SE/Cir-11/2008 dated April 17, 2008
5. Banking and Demat account operations
Procedure for segregation of own and clients’ funds and securities (in separate accounts)
Whether member maintains separate bank accounts for clients funds & own funds. Also, whether maintains separate beneficiary accounts for clients’ securities & own securities?
Whether clients funds and securities are segregated from own funds and securities?
Are there any instances of use of client beneficiary account or client bank account for unauthorised purposes? In case of any irregularity observed, mention the instances in detail.
Internal controls for use of client bank and client beneficiary accounts only for authorized purposes.
Applicable SEBI Circulars.
SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993.
6. Terminal operations and systems
Procedure and policy adopted by member before allotment of trading terminals
Whether terminals are provided by the member in his head office, branch office or the office of sub broker?
Whether any unauthorized terminal is observed to be allotted? If yes, give complete details.
Whether periodic audit of systems and software is conducted by certified systems auditor?
Whether terminals are operated by approved persons/approved users with valid BCSM certification?
Whether correct User name, login id, terminal location are reported to the Exchange?
Whether internal controls are in place to ensure that the certification of approved users has not expired?
Whether prior permission is obtained by member for providing IML? Whether member has complied with applicable provision of IML?
Whether updated version of software is used?
Whether back up facilities are in place and followed?
Whether broker has got his system audit done & submitted the system audit report to the Exchange within prescribed time limit?
Verification of terminals and its users, at the audit place.
Verification of certification of the approved users.
Due diligence adopted for password security
Procedure in place for audit of systems and software
Periodic updating of version and back up mechanism
System adopted for data storage, security and access
Verification of logs from server
Applicable SEBI Circulars.
SEBI circular no. SMDRP/Policy/Cir-49/2001 dated October 22, 2001
SEBI/MRD/SE/15958/2003 August 22, 2003
Exchange Notice No.20070517-26 dated May 17, 2007
7. Management of branches / sub brokers and internal control
System and Policy followed for opening / closing of branch
Whether survey is conducted by the member for opening / closing of branches?
In case of closure, whether advance notice of the same is sent to clients? Proof of the same.
Whether there is monitoring mechanism to identify sudden increase / decrease in client level turnover from any specific branch?
Whether periodic inspection of branch / sub broker is conducted and reports are maintained? What is the follow-up mechanism?
Whether unregistered intermediation is observed?
Whether the member has shared commission/brokerage with entities with whom trading members are forbidden to do business / another trading member / employee in the employment of another trading member?
Whether internal controls exists and are sufficient to cover the risks at the members end?
Whether Stock broker indemnity policy with standard cover/clauses has been taken?
Procedure adopted to inform the same to clients
Periodicity and procedure adopted for inspection of branches / sub brokers
Reporting mechanism and mode of informing the inspection observations to branches / sub brokers
Follow up action plan
Policy of fixing of roles and responsibilities of officials in head office, branches and sub-brokers office
Process laid out so as to prevent unregistered intermediation
Documentation of Internal controls and Comments on Internal controls in place
Verification of Stock broker indemnity insurance policy
Sharing of commission/brokerage
Applicable SEBI Circulars.
Section 12 of SEBI Act
SEBI circular no. SMD/SED/RCG/270/96 dated January 19, 1996
SEBI circular no. SMD/Policy/CIR-3/98 dated January 16, 1998
SEBI circular no. Sub-Brok/Cir/02/2001 dated January 15, 2001
Regulation 18B of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992
SEBI circular no. SMD/POLICY/CIRCULAR/3- 97 dated March 31, 1997.
8. Investor grievance handling
Mechanism to monitor complaints lodged with branches/sub-brokers
What is the system to report complaints received by branches / sub brokers to the head office?
Whether complaints are received from specific branch/sub-broker?
Whether complaints register includes complete details of investor complaints?
What is the procedure adopted to resolve complaints?
Whether specific action plan is framed by the member in respect of long pending complaints?
Whether designated email id for investor grievances is created and informed to the investors ?
What is the periodicity of monitoring investor complaints?
Whether complaints of substantial amount is escalated to the top management ?
Maintenance of complaints register
Redressal mechanism for complaints registered against the member
Comment on complaints pending for long period
Verification of investor grievance register and email id
Internal control for verification of complaints received through the designated email –id
Applicable SEBI Circulars.
SEBI circular no. MRD/DoP/Dep/SE/Cir-22/06 dated December 18, 2006
Clause 1(d) of Regulation 12A
9. Maintenance of Books of Accounts
Prescribed books of accounts, registers and records are maintained Exchange wise, with the required details and for the stipulated period as per regulatory requirement
Whether prescribed books of accounts, registers and records are maintained Exchange wise, with the required details and for the stipulated period as per regulatory requirement?
Whether exchange wise separate books of accounts are maintained?
Whether member has dealt with any suspended /defaulter /expelled member and/or prohibited entity?
Whether prior approval has been obtained by member for change in shareholding/directors/constitution?
Whether prior approval has been obtained in case the member has dealt with another member of the Exchange?
Whether member has intimated the Exchange in case of they have dealt with member of another stock exchange?
Whether advertisements are issued after prior permission of the Exchange?
Whether member maintains and updates client master in its back office?
Whether financial reports of the member has been analysed? Comments on the same.
Verification of books of accounts and other records
Internal controls on the process for taking approval of the Exchange
Analysis of financial reports
Applicable Regulations & SEBI Circulars
Rule 15 of Securities Contract Regulation Rules 1957
Regulation 17(1) & 18 of SEBI (Stock Broker Sub-broker) Regulation 1992
Rule 4 (c) of SEBI (Stock Brokers and Sub Brokers) Rules, 1992
Clause C(4) & C (5) of Regulation 7
SEBI Circular No. SMDRP/Policy/Cir-49/2001 dated October 22, 2001
SEBI circular no. MIRSD/MSS/Cir- 30/ 13289/03 dated July 09, 2003
SEBI circular no. SEBI/MIRSD/Cir-06/2004 dated January 13, 2004
SEBI circular no. MIRSD-DR 1/SRP/Cir- 43/28408/04 dated December 15, 2004
SEBI circular no. SEBI/MRD/SE/Cir-15/2005 dated August 4, 2005
10. Systems & Procedures pertaining to Prevention of Money Laundering Act (PMLA), 2002
Customer acceptance policy and customer due diligence measures
What is the process adopted by member to verify the identity of the customer and/or the person on whose behalf a transaction is being conducted ?
Whether any account was opened in fictitious name/benami account ?
What checks and balances are in place to ensure that the identity of the client does not match with any person having criminal background or is not banned in any other manner?
What are the factors of Risk perception having regard to client's location, address, nature of business activity, trading turnover and the manner of making payments so that the clients can be classified in to "High Risk", " Medium Risk"," Low Risk" category?
Whether details of appointment of Principal Officer and change in Principal officer, if any is intimated to FIU-India?
Whether member has adopted and implemented written guidelines prescribed under PMLA, 2002?
Whether member has adequate system to generate alerts for suspicious transactions?
As per provisions of Prevention of Money Laundering Act, 2002 whether record of transactions, its nature and its value are maintained?
Walk through of the process
Process of generation and monitoring alerts
System in place that allows continuous monitoring of transactions
Process for identifying STR (Suspicious Transaction Report) and reporting the same to FIU-India filed
Processes for verification of alerts with KYC details
Applicable SEBI Circulars.
SEBI circular no. ISD/CIR/RR/AML/1/06 dated January 18, 2006
SEBI circular no. ISD/CIR/RR/AML/2/06 dated March 20, 2006
SEBI circular no. ISD/AML/CIR-1/2008 dated December 19, 2008
SEBI letter no. ISD/SR/AK/AML/150847/2009 dated January 15, 2009
11. Transfer of trades
Transfer of trades in the back office
Whether any trades were transferred from one client code to another client code or from client code to pro or vice-versa in the back office of the member?
Whether any pattern was observed in case, transfer trades carried out at member’s back office
Verification of trade files downloaded by the Exchange with sauda register/back-office file of member (based on which contract notes are generated)
Internal controls for transfer of trades
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/Cir- 32/2003/27/08 dated August 27, 2003
12. Margin Trading
Verification of agreements
Whether member has obtained specific approval from the exchange, in case he is providing margin trading facility to his clients?
Whether member has complied with regulatory requirements related to margin trading?
Records of funding
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/SU/Cir-15/04 dated March 19, 2004
13. Proprietary Trading
Verification of ids enabled for pro
If member is doing pro trading, whether member has disclosed this information to his clients?
If member is doing pro trading from multiple locations, whether member has obtained prior approval from the Exchange in this regard?
Process for approval of Exchange
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/Cir-32/2003/27/08 dated August 27, 2003
SEBI letter no. SEBI/MRD/SE/Cir-42/2003 dated November 19, 2003
14. Internet Trading
Process of approval from Exchange
Verification of internet agreements
Whether member has obtained specific approval from the exchange, in case he is providing internet trading facility to his clients?
Whether member has complied with regulatory requirements related to internet trading?
Whether broker has got his system audit done & submitted the system audit report to the Exchange within prescribed time limit?
Procedure followed for user id and password
Internal controls for internet trading
Applicable SEBI Circulars.
SEBI Circular no. SMDRP/POLICY/CIR-06/2000 dated January 31, 2000
Exchange Notice No. 47315 /2000 dated April 17, 2000
15. Operations of Professional Clearing member/ Members clearing trades of other trading members
Verification of execution of trading -clearing member (TM-CM) agreements/Custodial Participant agreements
Whether TM-CM agreements are executed in prescribed formats with trading member?
Whether Clearing member custodial participant agreements are executed in prescribed formats ?
Whether statement of accounts has been sent to trading member/custodial participants/?
Whether clearing members had collected appropriate and adequate margins in prescribed forms from respective trading members?
Whether Margin collection reported to Exchange is in accordance with margins actually collected from trading member ?
Whether exposure allowed to trading members were based on requisite margins available with the clearing member?
Whether interest is charged to the trading member? If yes, what is the basis of interest with complete details like percentage of interest, periodicity of interest charged
Verification of issuance of statement of accounts to trading members/custodial participants
16. Securities Lending & Borrowing Scheme
Process of approval from Exchange
Whether member has obtained specific approval from the exchange?
Whether member has complied with regulatory requirements related to SLBS ?
Verification of SLBS agreement
Applicable SEBI Circulars.
SEBI circular no. MRD/DoP/SE/Dep/Cir- 14 /2007 dated the December 20, 2007
SEBI circular no. MRD/DoP/SE/Cir- 31 /2008 dated October 31, 2008
Points to be noted
The guidelines prescribed hereunder do not limit the scope of the internal audit. The points mentioned are only indicative in nature and not exhaustive. This has been prepared based on the regulatory requirement (as per relevant acts, rules, regulations and circulars) which keep on developing from time to time. The auditors should peruse them and update the scope of the audit.
The report shall also include the following.
1. If any major significant deviations and deviations of recurring nature are observed, the same should be reported separately in the covering page of the audit report. If auditors observations are in the nature of a deviation or a recommendation, the member’s response should be sought and recorded in the report.
2. Comments by auditor on the status of compliance in respect of deviations reported in the last audit report,
3. Improvements brought about in the operations between the last audit and the current audit.
4. In case the member has been inspected in the relevant half year by the Exchange / SEBI, comments by the auditor on whether the member has complied with the observations made in the Exchange/SEBI inspection report are to be included in the audit report.
5. A statement by the auditor that the provisions of SCRA 1956, SEBI Act 1992, SEBI (Stock Brokers and Sub-brokers) Regulations 1992, Rules, Bye laws, Regulations and circulars of SEBI, agreements, Bye laws of Exchange, circulars of Clearing House, data security and insurance have been covered in the audit.
6. Auditor shall specifically declare about direct / indirect interest in or relationship with the member or its share holders / directors / partners / proprietors / management, if any and also confirm that they do not perceive any conflict of interest in such relationship / interest while conducting internal audit of the said member.
7. Membership number allotted by the affiliated professional body should be quoted at the bottom of the report as provided in the format.
8. Observations in the report should be quantified giving instance wise details, details of segment and activity ( trading or clearing) for which such violations are observed.
Annexure - 3
CERTIFICATE FOR INTERNAL AUDIT
We have examined the relevant books of accounts, records and documents maintained by M/s. _______________, (name of the trading/clearing member) bearing SEBI registration number ______________________) a member of the Calcutta Stock Exchange Association Ltd., / National Stock Exchange of India Limited / Bombay Stock Exchange Ltd. / MCX-Stock Exchange /other Stock Exchange, for the following segments to fulfill the internal audit requirement as prescribed by SEBI vide circulars dated August 22, 2008 & October 21, 2008, for the half year ended_____________________.
Segments
(Cash Segment/Derivatives Segment / Debt Segment /Currency Derivatives/Securities Lending & Borrowing segment)
Activity (Trading/Clearing/Trading and Clearing)
SEBI registration number
The purpose of this audit is to examine that the processes, procedures followed and the operations carried out by the Trading Member/Clearing Member are as per the applicable Acts, Rules, Regulations, Bye-laws and Circulars prescribed by SEBI and the Stock Exchange.
We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of this internal audit. In our opinion proper books of accounts, records & documents, as per the regulatory requirement have been maintained by the member, so far as it appears from examination of the books.
We have conducted the audit within the framework provided by SEBI/Stock Exchange for the purpose of this internal audit.
To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud / non-compliance /violation by the member is observed during the course of this audit.
Based on the scrutiny of relevant books of accounts, records and documents, we certify that the member has complied with the relevant provisions of SEBI Act, 1992, Securities Contracts (Regulation) Act 1956, Securities Contracts (Regulation) Rules 1957, SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 and various circulars of SEBI. The member has complied with the Rules, Bye-laws, Regulations of BSE / NSE / MCX-SE and various circulars issued by the Stock Exchange and Clearing Corporation/Clearing House.
We declare that we do not have any direct / indirect interest in or relationship with the member or its directors / partners / proprietors / management and also confirm that we do not perceive any conflict of interest in such relationship / interest while conducting internal audit of the member.
In our opinion and to the best of our information and according to the explanations given to us by the proprietor/partner(s)/director(s)/compliance officer, the Report provided by us as per the Annexure and subject to our observations, which covers the entire scope of the audit, is true and correct.
__________________
Company Secretary / Cost and Management Accountant / Chartered Accountant
(Seal & Signature)
(Name of the Proprietor / Partner)
Membership no. / CP. No.
Place:-
Date:-
Dated: 6th April 2009
Sub: Internal Audit for stock brokers/trading members/clearing members
This is further to Exchange Notice October 29, 2008 wherein all the stock brokers/trading members/clearing members were directed to carry out complete internal audit on a half yearly basis by chartered accountants, company secretaries or cost and management accountants who are in practice and who do not have any conflict of interest. It was also informed that, the first internal audit period would be from October 1, 2008 to March 31, 2009.
Further, on the basis of SEBI letter No. MIRSD/DPS-I/PG/158174/09 dated March 23, 2009, the applicability, scope/guidelines of audit, format of audit report, audit certificate and the time limit for submission of audit report are given as Annexure 1, 2 and 3.
All stock brokers/trading members/clearing members are advised to ensure compliance with the above requirements.
Members are advised to submit the Audit Reports to the Surveillance Department of the Exchange on 4th Floor of the Exchange at 7, Lyons Range, Kolkata.
In case of any queries / clarification, the members may contact Manager Surveillance and DGM Surveillance.
Company Secretary and Financial Controller
Annexure – 1
INTERNAL AUDIT FOR STOCK BROKERS/TRADING MEMBERS/CLEARING MEMBERS
Applicability
Trading Members (Stock Brokers) and Clearing members are required to appoint an internal auditor for carrying out complete internal audit in all segments of the Exchange in which they are enabled for trading/clearing (wherein atleast a one/single trade have been executed or cleared by them) and submit a report to the Exchange on half yearly basis. The first half year period would start from October 01, 2008.
Who can conduct internal audit
Internal audit is required to be carried out by any Chartered Accountant, Company Secretary or Cost and Management Accountant who is in practice and who does not have any conflict of interest.
Scope/Purpose of Audit
The purpose of audit should be
(a) to ensure that the books of account, records and documents have been maintained in the manner required under Securities Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956, SEBI (Stock brokers and Sub-brokers) Regulations, 1992, Securities Contracts (Regulation) Rules, 1957, circulars issued by SEBI & Exchange, Bye laws of the Exchange including agreements, data security and insurance in respect of operations of trading member/clearing member.
(b) to ascertain whether adequate internal control systems, procedures and safeguards have been established and are being followed by the intermediary to fulfill its obligations under Securities and Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956, SEBI (Stock brokers and Sub-brokers) Regulations, 1992, Securities Contracts (Regulation) Rules, 1957, circulars issued by SEBI & Exchange, Bye laws of the Exchanges and with respect to data security and insurance in respect of operations of trading member/clearing member.
(c) to ascertain whether any circumstances exist which would render the intermediary unfit or ineligible for dealing in securities market.
(d) to ascertain whether the provisions of the securities laws and the directions and/or circulars issued there under by SEBI/Exchange have been complied with
(e) to ascertain, whether the provision of Bye-laws, notices, circulars, instructions or orders issued by stock exchanges have been complied with
(f) to inquire suo motu into such matters as may be deemed fit by the auditor in the interest of investors or the securities market
Submission of internal audit report
Internal auditor would submit the audit report to the Proprietor/Partners/Board of respective trading/clearing member. In case the trading member is a partnership firm or corporate entity, the report would be placed before the meeting of its management committee/Board of Directors. In all cases, the trading member shall forward the audit report along with para-wise/point wise comments to respective stock exchanges within 3 months from the end of the relevant half year audit period. The audit report may be combined across segments and activity (trading/clearing) for respective Exchanges.
The initial internal audit should be for the period commencing from October 1, 2008 till March 31, 2009 and the audit report together with para-wise/point wise comments should be submitted to the Exchange within 30th June 2009 and the subsequent audit reports with comments should be submitted to the Stock Exchange within 3 months from the end of relevant half year audit period.
Non-compliance relating to internal audit by the members
Non-submission of internal audit report as per the aforesaid guidelines shall be treated as non-compliance and suitable disciplinary action may be initiated against the concerned member/s. Where, in the opinion of the Exchange, the quality of the reporting is not satisfactory or the audit is not carried out in accordance with the aforesaid guidelines, the Exchange reserves the right to advise the concerned member/s to change the auditors and/or submit revised reports.
Annexure – 2
Areas to be covered in internal audit and areas on which comments needs to be incorporated in the report are given below
1. Client registration and documentation
Execution of KYC, MCA/TPA, and RDD – checks and balances in place
Whether KYC, MCA/TPA, RDD are executed in the prescribed formats & the same is executed before execution of trades for the client?
Whether UCC is allotted to the client & the same is uploaded to the Exchange with PAN
Whether all fields in KYC including client’s financial details are filled in properly?
Whether proper proof of identity, PAN and proof of address are taken with KYC form?
Whether any contravening clauses are included in MCA/TPA?
Whether in person verification of clients is done by the employees of the trading member only?
Whether date of verification, name and signature of the official who has done in-person verification and the member’s stamp incorporated in the client registration form?
Whether copies of all the documents executed by client are given to the respective clients?
Whether change in address, bank account or demat account is carried out on receipt of written request along with documentary proof from the respective client?
Whether client details including financial details are reviewed periodically and updated?
Verification of formats of KYC, MCA/TPA and RDD and attachments including proof of identity and address, as prescribed by SEBI/BSE
Verification that Contradictory clauses are not mentioned in KYC, MCA/TPA and RDD
Systems and procedures put in place by member for verification of PAN before opening account
Procedure followed by the member for informing UCC to the clients & uploading to the Exchange
Mechanism to ensure financial details of clients
Procedure adopted for in person verification of clients
Procedure adopted by relationship managers, if any, for procuring new clients
Delivery of copies of client registration documents to the clients
Storage of client registration documents and retrieval mechanism
Procedure adopted for obtaining clients’ consent for electronic contract notes
Periodic review of client related information and updation of the same in system
Verification of RDD/KYC/MCA/TPA of different types of clients
Acquaintance procedure for new clients
Applicable SEBI Circulars.
SEBI circular no. SMDRP/Policy/Cir-39/2001 dated July 18, 2001
SEBI circular no. SEBI/MIRSD/DPS-1/Cir-31/2004, dated August 26, 2004 & Regulation-7 D
SEBI circular no. MRD/DoP/SE/Cir- 35/2004 dated October 26, 2004
SEBI circular no. MRD/DoP/Cir- 05/2007 dated April 27, 2007
MIRSD/DPS-III / 130466 / 2008 dated July 02, 2008
2. Order management and risk management systems
Procedure adopted for receipt of orders from clients
Whether checks are in place to ensure that no unauthorized orders are executed from any of the terminals?
Whether control reports like orders executed away from market price, client-wise / scrip-wise / terminal-wise volumes / exposures are generated to monitor any manipulation or unwarranted activity?
In case of dormant accounts, are there any checks in place to ensure that in case the account is reactivated whether it is operated by the respective client only?
Whether initial and other margins are collected from respective clients in the prescribed form of funds, fixed deposit receipts, bank guarantees and approved securities with appropriate haircut?
Whether the member has a proper system for reporting the correct client margin collection, in Derivatives segment?
Verify whether the margin reported by the member to the Exchange in Derivatives segment is actually collected and available in the books of accounts of the member. In case of any irregularity observed, mention the instances wherein wrong reporting of margin collected from clients/trading members was observed.
Whether Risk Management System (RMS) includes policy on margin collection from clients/trading member and the RMS is documented?
Whether proper systems are in place to ensure timely collection for pay-in from the respective client as per settlement schedule?
Whether proper monitoring mechanism is in place to review long outstanding debit balances in clients’ accounts and recovery of the same?
Whether member has reported details of client funding, if any, to the exchange within prescribed time limit?
What are the sources of funds in case client funding is observed?
Whether all the institutional trades are routed through custodians by following Straight Through Processing (STP) ?
What are the reasons for institutional trades not being routed through custodians? Whether any specific pattern is observed for the same?
Whether member has obtained prior approval from the exchange before providing terminal to the clients under DMA facility?
Whether member has complied with regulatory requirements related to. DMA?
Mechanism for order management and execution
Procedure adopted for setting Limits at client level / Terminal level/Dealer level
Policy on Margin collection mechanism and the modes of margin money
Procedure adopted for reporting of client margin collection to Clearing House
Review of process adopted for monitoring / recovery of long outstanding debit balances
Procedure adopted for calculation & reporting client funding
Procedure for monitoring institutional trades not routed through custodians
Procedure adopted for providing Direct Market Access (DMA) facility
Applicable SEBI Circulars.
SEBI circular no. MRD/DoP/SE/Cir-07/2005 dated February 23, 2005
SEBI circular no. MRD/DoP/SE/Cir- 17/2005 dated September 02, 2005
Exchange Notice no. 20040420-12 dated April 20, 2004.
Exchange notice no. 20080417-24 dated April 17, 2008.
Exchange Notice No. 20051216-8 dated December 16, 2005
3. Contract notes, Client margin details and Statement of accounts
Procedure adopted for issuance of contract notes
Whether contract notes are sent within 24 hours of execution of trades and margin details are sent daily to respective clients and proof of delivery / dispatch is maintained?
Whether all prescribed details including name and signature of authorised signatory, dealing office details and brokerage are contained in contract note?
In case contract notes and margin details are sent in electronic form, whether log is maintained? Whether trail of bounced mails is maintained and physical delivery is ensured in case of bounce mails?
Whether member has complied with regulatory requirements related to. Electronic Contract Notes(ECN)?
Whether complete statement of accounts for funds and securities are issued on a quarterly basis to clients, with error reporting clause? Whether proof of sending the same is maintained?
Verification of format of contract notes issued
Verification of copy of contract note with Proof of dispatch/register of dispatch/logs maintained
Adherence to electronic contract note norms, if applicable
Procedure adopted for sending statement of accounts
Contents & periodicity of statement of accounts of funds and securities
Procedure adopted for sending margin details to clients
Procedure for maintaining acknowledgement / proof of delivery of contract notes/statement of accounts/margin details to the clients
Applicable SEBI Circulars.
Clause B(2) of Code of conduct for Stock Brokers specified under Regulation 7
SMD-1/23341 dated November 18, 1993
SMD (B)/104/22775/93 dated October 29, 1993
SMD/MDP/CIR/043/96 dated August 5, 1996
MRD/DoP/SE/Cir-20/2005 dated September 08, 2005
SEBI/DNPD/143542 /Cir-43/08 dated November 06, 2008
4. Dealing with clients’ funds and securities
Verification of details of cash receipts from / payments to clients, if any, observed during the audit period are to be given (mentioning any specific branch involved).
Whether cash dealings with clients are done by branches / sub brokers?
Whether banker’s cheque / demand draft are accompanied with written request from the respective client?
Whether pay-in or pay-out is received from or delivered to respective clients only?
Whether any instances were observed wherein pay-in / pay out was received from / made to account other than the respective client account? Whether systems are in place to ensure compliance in this regard by the member?
Whether collaterals of clients were pledged with banks / other entities for raising funds? If yes, details of such instances observed are to be given.
Whether funds raised by pledging client securities were utilised for respective client only? List of instances to be provided in case of non-utilisation of proceeds for respective client?
Whether client’s funds / securities are transferred to respective clients accounts within one working day of after the pay-out of the settlement?
Whether any instance of misutilisation of clients’ funds or securities is observed? If yes, give complete details of such instances
Whether bank book and register of securities are in alignment with bank statements and transaction statements provided by banks and depositories?
Whether dividend and other corporate benefits received on behalf of clients is paid/credited/passed on to the respective clients account ?
Verification of internal controls adopted by the member while accepting banker’s cheque / demand draft from clients
Procedure for ensuring that receipts and payment of funds/securities are from/to respective client only
Periodic Reconciliation of books of accounts
Verification of following books of accounts/records
- Register of Securities
- Bank Statements
- Depository accounts maintained by member
- Client ledgers
- Cash Book
- Bank Book
- Details of records of client securities pledged, if any.
- Underlying for any overdraft/loan account.
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/Cir- 33/2003/27/08 dated August 27, 2003
Code of conduct for Stock Brokers specified under Regulation 7 of SEBI (Stock Brokers and Sub brokers) Regulations, 1992.
SEBI circular no. MRD/DoP/SE/Cir-11/2008 dated April 17, 2008
5. Banking and Demat account operations
Procedure for segregation of own and clients’ funds and securities (in separate accounts)
Whether member maintains separate bank accounts for clients funds & own funds. Also, whether maintains separate beneficiary accounts for clients’ securities & own securities?
Whether clients funds and securities are segregated from own funds and securities?
Are there any instances of use of client beneficiary account or client bank account for unauthorised purposes? In case of any irregularity observed, mention the instances in detail.
Internal controls for use of client bank and client beneficiary accounts only for authorized purposes.
Applicable SEBI Circulars.
SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993.
6. Terminal operations and systems
Procedure and policy adopted by member before allotment of trading terminals
Whether terminals are provided by the member in his head office, branch office or the office of sub broker?
Whether any unauthorized terminal is observed to be allotted? If yes, give complete details.
Whether periodic audit of systems and software is conducted by certified systems auditor?
Whether terminals are operated by approved persons/approved users with valid BCSM certification?
Whether correct User name, login id, terminal location are reported to the Exchange?
Whether internal controls are in place to ensure that the certification of approved users has not expired?
Whether prior permission is obtained by member for providing IML? Whether member has complied with applicable provision of IML?
Whether updated version of software is used?
Whether back up facilities are in place and followed?
Whether broker has got his system audit done & submitted the system audit report to the Exchange within prescribed time limit?
Verification of terminals and its users, at the audit place.
Verification of certification of the approved users.
Due diligence adopted for password security
Procedure in place for audit of systems and software
Periodic updating of version and back up mechanism
System adopted for data storage, security and access
Verification of logs from server
Applicable SEBI Circulars.
SEBI circular no. SMDRP/Policy/Cir-49/2001 dated October 22, 2001
SEBI/MRD/SE/15958/2003 August 22, 2003
Exchange Notice No.20070517-26 dated May 17, 2007
7. Management of branches / sub brokers and internal control
System and Policy followed for opening / closing of branch
Whether survey is conducted by the member for opening / closing of branches?
In case of closure, whether advance notice of the same is sent to clients? Proof of the same.
Whether there is monitoring mechanism to identify sudden increase / decrease in client level turnover from any specific branch?
Whether periodic inspection of branch / sub broker is conducted and reports are maintained? What is the follow-up mechanism?
Whether unregistered intermediation is observed?
Whether the member has shared commission/brokerage with entities with whom trading members are forbidden to do business / another trading member / employee in the employment of another trading member?
Whether internal controls exists and are sufficient to cover the risks at the members end?
Whether Stock broker indemnity policy with standard cover/clauses has been taken?
Procedure adopted to inform the same to clients
Periodicity and procedure adopted for inspection of branches / sub brokers
Reporting mechanism and mode of informing the inspection observations to branches / sub brokers
Follow up action plan
Policy of fixing of roles and responsibilities of officials in head office, branches and sub-brokers office
Process laid out so as to prevent unregistered intermediation
Documentation of Internal controls and Comments on Internal controls in place
Verification of Stock broker indemnity insurance policy
Sharing of commission/brokerage
Applicable SEBI Circulars.
Section 12 of SEBI Act
SEBI circular no. SMD/SED/RCG/270/96 dated January 19, 1996
SEBI circular no. SMD/Policy/CIR-3/98 dated January 16, 1998
SEBI circular no. Sub-Brok/Cir/02/2001 dated January 15, 2001
Regulation 18B of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992
SEBI circular no. SMD/POLICY/CIRCULAR/3- 97 dated March 31, 1997.
8. Investor grievance handling
Mechanism to monitor complaints lodged with branches/sub-brokers
What is the system to report complaints received by branches / sub brokers to the head office?
Whether complaints are received from specific branch/sub-broker?
Whether complaints register includes complete details of investor complaints?
What is the procedure adopted to resolve complaints?
Whether specific action plan is framed by the member in respect of long pending complaints?
Whether designated email id for investor grievances is created and informed to the investors ?
What is the periodicity of monitoring investor complaints?
Whether complaints of substantial amount is escalated to the top management ?
Maintenance of complaints register
Redressal mechanism for complaints registered against the member
Comment on complaints pending for long period
Verification of investor grievance register and email id
Internal control for verification of complaints received through the designated email –id
Applicable SEBI Circulars.
SEBI circular no. MRD/DoP/Dep/SE/Cir-22/06 dated December 18, 2006
Clause 1(d) of Regulation 12A
9. Maintenance of Books of Accounts
Prescribed books of accounts, registers and records are maintained Exchange wise, with the required details and for the stipulated period as per regulatory requirement
Whether prescribed books of accounts, registers and records are maintained Exchange wise, with the required details and for the stipulated period as per regulatory requirement?
Whether exchange wise separate books of accounts are maintained?
Whether member has dealt with any suspended /defaulter /expelled member and/or prohibited entity?
Whether prior approval has been obtained by member for change in shareholding/directors/constitution?
Whether prior approval has been obtained in case the member has dealt with another member of the Exchange?
Whether member has intimated the Exchange in case of they have dealt with member of another stock exchange?
Whether advertisements are issued after prior permission of the Exchange?
Whether member maintains and updates client master in its back office?
Whether financial reports of the member has been analysed? Comments on the same.
Verification of books of accounts and other records
Internal controls on the process for taking approval of the Exchange
Analysis of financial reports
Applicable Regulations & SEBI Circulars
Rule 15 of Securities Contract Regulation Rules 1957
Regulation 17(1) & 18 of SEBI (Stock Broker Sub-broker) Regulation 1992
Rule 4 (c) of SEBI (Stock Brokers and Sub Brokers) Rules, 1992
Clause C(4) & C (5) of Regulation 7
SEBI Circular No. SMDRP/Policy/Cir-49/2001 dated October 22, 2001
SEBI circular no. MIRSD/MSS/Cir- 30/ 13289/03 dated July 09, 2003
SEBI circular no. SEBI/MIRSD/Cir-06/2004 dated January 13, 2004
SEBI circular no. MIRSD-DR 1/SRP/Cir- 43/28408/04 dated December 15, 2004
SEBI circular no. SEBI/MRD/SE/Cir-15/2005 dated August 4, 2005
10. Systems & Procedures pertaining to Prevention of Money Laundering Act (PMLA), 2002
Customer acceptance policy and customer due diligence measures
What is the process adopted by member to verify the identity of the customer and/or the person on whose behalf a transaction is being conducted ?
Whether any account was opened in fictitious name/benami account ?
What checks and balances are in place to ensure that the identity of the client does not match with any person having criminal background or is not banned in any other manner?
What are the factors of Risk perception having regard to client's location, address, nature of business activity, trading turnover and the manner of making payments so that the clients can be classified in to "High Risk", " Medium Risk"," Low Risk" category?
Whether details of appointment of Principal Officer and change in Principal officer, if any is intimated to FIU-India?
Whether member has adopted and implemented written guidelines prescribed under PMLA, 2002?
Whether member has adequate system to generate alerts for suspicious transactions?
As per provisions of Prevention of Money Laundering Act, 2002 whether record of transactions, its nature and its value are maintained?
Walk through of the process
Process of generation and monitoring alerts
System in place that allows continuous monitoring of transactions
Process for identifying STR (Suspicious Transaction Report) and reporting the same to FIU-India filed
Processes for verification of alerts with KYC details
Applicable SEBI Circulars.
SEBI circular no. ISD/CIR/RR/AML/1/06 dated January 18, 2006
SEBI circular no. ISD/CIR/RR/AML/2/06 dated March 20, 2006
SEBI circular no. ISD/AML/CIR-1/2008 dated December 19, 2008
SEBI letter no. ISD/SR/AK/AML/150847/2009 dated January 15, 2009
11. Transfer of trades
Transfer of trades in the back office
Whether any trades were transferred from one client code to another client code or from client code to pro or vice-versa in the back office of the member?
Whether any pattern was observed in case, transfer trades carried out at member’s back office
Verification of trade files downloaded by the Exchange with sauda register/back-office file of member (based on which contract notes are generated)
Internal controls for transfer of trades
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/Cir- 32/2003/27/08 dated August 27, 2003
12. Margin Trading
Verification of agreements
Whether member has obtained specific approval from the exchange, in case he is providing margin trading facility to his clients?
Whether member has complied with regulatory requirements related to margin trading?
Records of funding
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/SU/Cir-15/04 dated March 19, 2004
13. Proprietary Trading
Verification of ids enabled for pro
If member is doing pro trading, whether member has disclosed this information to his clients?
If member is doing pro trading from multiple locations, whether member has obtained prior approval from the Exchange in this regard?
Process for approval of Exchange
Applicable SEBI Circulars.
SEBI circular no. SEBI/MRD/SE/Cir-32/2003/27/08 dated August 27, 2003
SEBI letter no. SEBI/MRD/SE/Cir-42/2003 dated November 19, 2003
14. Internet Trading
Process of approval from Exchange
Verification of internet agreements
Whether member has obtained specific approval from the exchange, in case he is providing internet trading facility to his clients?
Whether member has complied with regulatory requirements related to internet trading?
Whether broker has got his system audit done & submitted the system audit report to the Exchange within prescribed time limit?
Procedure followed for user id and password
Internal controls for internet trading
Applicable SEBI Circulars.
SEBI Circular no. SMDRP/POLICY/CIR-06/2000 dated January 31, 2000
Exchange Notice No. 47315 /2000 dated April 17, 2000
15. Operations of Professional Clearing member/ Members clearing trades of other trading members
Verification of execution of trading -clearing member (TM-CM) agreements/Custodial Participant agreements
Whether TM-CM agreements are executed in prescribed formats with trading member?
Whether Clearing member custodial participant agreements are executed in prescribed formats ?
Whether statement of accounts has been sent to trading member/custodial participants/?
Whether clearing members had collected appropriate and adequate margins in prescribed forms from respective trading members?
Whether Margin collection reported to Exchange is in accordance with margins actually collected from trading member ?
Whether exposure allowed to trading members were based on requisite margins available with the clearing member?
Whether interest is charged to the trading member? If yes, what is the basis of interest with complete details like percentage of interest, periodicity of interest charged
Verification of issuance of statement of accounts to trading members/custodial participants
16. Securities Lending & Borrowing Scheme
Process of approval from Exchange
Whether member has obtained specific approval from the exchange?
Whether member has complied with regulatory requirements related to SLBS ?
Verification of SLBS agreement
Applicable SEBI Circulars.
SEBI circular no. MRD/DoP/SE/Dep/Cir- 14 /2007 dated the December 20, 2007
SEBI circular no. MRD/DoP/SE/Cir- 31 /2008 dated October 31, 2008
Points to be noted
The guidelines prescribed hereunder do not limit the scope of the internal audit. The points mentioned are only indicative in nature and not exhaustive. This has been prepared based on the regulatory requirement (as per relevant acts, rules, regulations and circulars) which keep on developing from time to time. The auditors should peruse them and update the scope of the audit.
The report shall also include the following.
1. If any major significant deviations and deviations of recurring nature are observed, the same should be reported separately in the covering page of the audit report. If auditors observations are in the nature of a deviation or a recommendation, the member’s response should be sought and recorded in the report.
2. Comments by auditor on the status of compliance in respect of deviations reported in the last audit report,
3. Improvements brought about in the operations between the last audit and the current audit.
4. In case the member has been inspected in the relevant half year by the Exchange / SEBI, comments by the auditor on whether the member has complied with the observations made in the Exchange/SEBI inspection report are to be included in the audit report.
5. A statement by the auditor that the provisions of SCRA 1956, SEBI Act 1992, SEBI (Stock Brokers and Sub-brokers) Regulations 1992, Rules, Bye laws, Regulations and circulars of SEBI, agreements, Bye laws of Exchange, circulars of Clearing House, data security and insurance have been covered in the audit.
6. Auditor shall specifically declare about direct / indirect interest in or relationship with the member or its share holders / directors / partners / proprietors / management, if any and also confirm that they do not perceive any conflict of interest in such relationship / interest while conducting internal audit of the said member.
7. Membership number allotted by the affiliated professional body should be quoted at the bottom of the report as provided in the format.
8. Observations in the report should be quantified giving instance wise details, details of segment and activity ( trading or clearing) for which such violations are observed.
Annexure - 3
CERTIFICATE FOR INTERNAL AUDIT
We have examined the relevant books of accounts, records and documents maintained by M/s. _______________, (name of the trading/clearing member) bearing SEBI registration number ______________________) a member of the Calcutta Stock Exchange Association Ltd., / National Stock Exchange of India Limited / Bombay Stock Exchange Ltd. / MCX-Stock Exchange /other Stock Exchange, for the following segments to fulfill the internal audit requirement as prescribed by SEBI vide circulars dated August 22, 2008 & October 21, 2008, for the half year ended_____________________.
Segments
(Cash Segment/Derivatives Segment / Debt Segment /Currency Derivatives/Securities Lending & Borrowing segment)
Activity (Trading/Clearing/Trading and Clearing)
SEBI registration number
The purpose of this audit is to examine that the processes, procedures followed and the operations carried out by the Trading Member/Clearing Member are as per the applicable Acts, Rules, Regulations, Bye-laws and Circulars prescribed by SEBI and the Stock Exchange.
We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of this internal audit. In our opinion proper books of accounts, records & documents, as per the regulatory requirement have been maintained by the member, so far as it appears from examination of the books.
We have conducted the audit within the framework provided by SEBI/Stock Exchange for the purpose of this internal audit.
To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud / non-compliance /violation by the member is observed during the course of this audit.
Based on the scrutiny of relevant books of accounts, records and documents, we certify that the member has complied with the relevant provisions of SEBI Act, 1992, Securities Contracts (Regulation) Act 1956, Securities Contracts (Regulation) Rules 1957, SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 and various circulars of SEBI. The member has complied with the Rules, Bye-laws, Regulations of BSE / NSE / MCX-SE and various circulars issued by the Stock Exchange and Clearing Corporation/Clearing House.
We declare that we do not have any direct / indirect interest in or relationship with the member or its directors / partners / proprietors / management and also confirm that we do not perceive any conflict of interest in such relationship / interest while conducting internal audit of the member.
In our opinion and to the best of our information and according to the explanations given to us by the proprietor/partner(s)/director(s)/compliance officer, the Report provided by us as per the Annexure and subject to our observations, which covers the entire scope of the audit, is true and correct.
__________________
Company Secretary / Cost and Management Accountant / Chartered Accountant
(Seal & Signature)
(Name of the Proprietor / Partner)
Membership no. / CP. No.
Place:-
Date:-
Saturday, February 21, 2009
Lending Under Consortium arrangements RBI certification
This may be a new addition to CMAs apart from other professionals..
=========================================================
RBI/2008-2009/379
DBOD.No. BP.BC.110/08.12.001/2008-09
February 10, 2009
The Chairman & Managing Directors /
Chief Executive Officers of
All Scheduled Commercial Banks
(Excluding RRBs and LABs)
Dear Sir,
Lending under Consortium Arrangement / Multiple Banking Arrangements
Please refer to Paragraph 2(iii) of our circular RBI/2008-09/183/DBOD.No.BP.BC.46 /08.12 .001/2008-09 dated September 19, 2008 on the captioned subject.
2. In terms of Paragraph 2(iii) of the above circular, in order to strengthen the information sharing system among banks in respect of the borrowers enjoying credit facilities from multiple banks, the banks are required to obtain regular certification by a professional, preferably a Company Secretary, regarding compliance of various statutory prescriptions that are in vogue, as per specimen given in Annex III to the above circular.
3. In this context it is clarified that in addition to Company Secretaries, banks can also accept the certification by a Chartered Accountants & Cost Accountants. Further, on the basis of suggestions received from Indian Banks Association, Annex III - Part I & Part II (copy enclosed) has also been modified.
Yours faithfully,
(P. Vijaya Bhaskar)
Chief General Manager.
Encl: As above.
--------------------------------------------------------------------------------
Part : I
DILIGENCE REPORT
To,
The Manager,
___________________ (Name of the Bank)
I/We have examined the registers, records, books and papers of ____________ Limited having its registered office at……………………………………………………… as required to be maintained under the Companies Act, 1956 (the Act) and the rules made thereunder , the provisions contained in the Memorandum and Articles of Association of the Company, the provisions of various statutes, wherever applicable, as well as the provisions contained in the Listing Agreement/s, if any, entered into by the Company with the recognized stock exchange/s for the half year ended on…………… . In my/our opinion and to the best of my/our information and according to the examination carried out by me/us and explanations furnished to me/us by the Company, its officers and agents. I/We report that in respect of the aforesaid period:
1. The management of the Company is carried out by the Board of Directors comprising of as listed in Annexure …., and the Board was duly constituted.
During the period under review the following changes that took place in the Board of Directors of the Company are listed in the Annexure …., and such changes were carried out in due compliance with the provisions of the Companies Act, 1956.
2. The shareholding pattern of the company as on ------- was as detailed in Annexure …………:
During the period under review the changes that took place in the shareholding pattern of the Company are detailed in Annexure…….:
3. The company has altered the following provisions of
(i) The Memorandum of Association during the period under review and has complied with the provisions of the Companies Act, 1956 for this purpose.
(ii) The Articles of Association during the period under review and has complied with the provisions of the Companies Act, 1956 for this purpose.
4. The company has entered into transactions with business entities in which directors of the company were interested as detailed in Annexure….. .
5. The company has advanced loans, given guarantees and provided securities amounting to Rs. ____________ to its directors and/or persons or firms or companies in which directors were interested, and has complied with Section – 295 of the Companies Act , 1956.
6. The Company has made loans and investments; or given guarantees or provided securities to other business entities as detailed in Annexure ….and has complied with the provisions of the Companies Act, 1956.
7. The amount borrowed by the Company from its directors, members, financial institutions, banks and others were within the borrowing limits of the Company. Such borrowings were made by the Company in compliance with applicable laws. The break up of the Company's domestic borrowings were as detailed in Annexure ….. :
8. The Company has not defaulted in the repayment of public deposits, unsecured loans, debentures, facilities granted by banks, financial institutions and non-banking financial companies.
9. The Company has created, modified or satisfied charges on the assets of the company as detailed in Annexure…. Investments in wholly owned Subsidiaries and/or Joint Ventures abroad made by the company are as detailed in Annexure ……
10. Principal value of the forex exposure and Overseas Borrowings of the company as on ………… are as detailed in the Annexure under"
11. The Company has issued and allotted the securities to the persons-entitled thereto and has also issued letters, coupons, warrants and certificates thereof as applicable to the concerned persons and also redeemed its preference shares/debentures and bought back its shares within the stipulated time in compliance with the provisions of the Companies Act,1956 and other relevant statutes.
12. The Company has insured all its secured assets.
13. The Company has complied with the terms and conditions, set forth by the lending bank/financial institution at the time of availing any facility and also during the currency of the facility
14. The Company has declared and paid dividends to its shareholders as per the provisions of the Companies Act, 1956.
15. The Company has insured fully all its assets.
16. The name of the Company and or any of its Directors does not appear in the defaulters' list of Reserve Bank of India.
17. The name of the Company and or any of its Directors does not appear in the Specific Approval List of Export Credit Guarantee Corporation.
18. The Company has paid all its Statutory dues and satisfactory arrangements had been made for arrears of any such dues.
19. The funds borrowed from banks/financial institutions have been used by the company for the purpose for which they were borrowed.
20. The Company has complied with the provisions stipulated in Section 372 A of the Companies Act in respect of its Inter Corporate loans and investments.
21. It has been observed from the Reports of the Directors and the Auditors that the Company has complied with the applicable Accounting Standards issued by the Institute of Chartered Accountants in India.
22. The Company has credited and paid to the Investor Education and Protection Fund within the stipulated time, all the unpaid dividends and other amounts required to be so credited.
23. Prosecutions initiated against or show cause notices received by the Company for alleged defaults/offences under various statutory provisions and also fines and penalties imposed on the Company and or any other action initiated against the Company and /or its directors in such cases are detailed in Annexure….. .
24. The Company has (being a listed entity) complied with the provisions of the Listing Agreement.
25. The Company has deposited within the stipulated time both Employees' and Employer's contribution to Provident Fund with the prescribed authorities.
Note : The qualification, reservation or adverse remarks, if any, are explicitly stated may be stated at the relevant paragraphs above place(s).
Place: Signature:
Date: Name of Company Secretary/Firm:
C.P. No.:
=========================================================
RBI/2008-2009/379
DBOD.No. BP.BC.110/08.12.001/2008-09
February 10, 2009
The Chairman & Managing Directors /
Chief Executive Officers of
All Scheduled Commercial Banks
(Excluding RRBs and LABs)
Dear Sir,
Lending under Consortium Arrangement / Multiple Banking Arrangements
Please refer to Paragraph 2(iii) of our circular RBI/2008-09/183/DBOD.No.BP.BC.46 /08.12 .001/2008-09 dated September 19, 2008 on the captioned subject.
2. In terms of Paragraph 2(iii) of the above circular, in order to strengthen the information sharing system among banks in respect of the borrowers enjoying credit facilities from multiple banks, the banks are required to obtain regular certification by a professional, preferably a Company Secretary, regarding compliance of various statutory prescriptions that are in vogue, as per specimen given in Annex III to the above circular.
3. In this context it is clarified that in addition to Company Secretaries, banks can also accept the certification by a Chartered Accountants & Cost Accountants. Further, on the basis of suggestions received from Indian Banks Association, Annex III - Part I & Part II (copy enclosed) has also been modified.
Yours faithfully,
(P. Vijaya Bhaskar)
Chief General Manager.
Encl: As above.
--------------------------------------------------------------------------------
Part : I
DILIGENCE REPORT
To,
The Manager,
___________________ (Name of the Bank)
I/We have examined the registers, records, books and papers of ____________ Limited having its registered office at……………………………………………………… as required to be maintained under the Companies Act, 1956 (the Act) and the rules made thereunder , the provisions contained in the Memorandum and Articles of Association of the Company, the provisions of various statutes, wherever applicable, as well as the provisions contained in the Listing Agreement/s, if any, entered into by the Company with the recognized stock exchange/s for the half year ended on…………… . In my/our opinion and to the best of my/our information and according to the examination carried out by me/us and explanations furnished to me/us by the Company, its officers and agents. I/We report that in respect of the aforesaid period:
1. The management of the Company is carried out by the Board of Directors comprising of as listed in Annexure …., and the Board was duly constituted.
During the period under review the following changes that took place in the Board of Directors of the Company are listed in the Annexure …., and such changes were carried out in due compliance with the provisions of the Companies Act, 1956.
2. The shareholding pattern of the company as on ------- was as detailed in Annexure …………:
During the period under review the changes that took place in the shareholding pattern of the Company are detailed in Annexure…….:
3. The company has altered the following provisions of
(i) The Memorandum of Association during the period under review and has complied with the provisions of the Companies Act, 1956 for this purpose.
(ii) The Articles of Association during the period under review and has complied with the provisions of the Companies Act, 1956 for this purpose.
4. The company has entered into transactions with business entities in which directors of the company were interested as detailed in Annexure….. .
5. The company has advanced loans, given guarantees and provided securities amounting to Rs. ____________ to its directors and/or persons or firms or companies in which directors were interested, and has complied with Section – 295 of the Companies Act , 1956.
6. The Company has made loans and investments; or given guarantees or provided securities to other business entities as detailed in Annexure ….and has complied with the provisions of the Companies Act, 1956.
7. The amount borrowed by the Company from its directors, members, financial institutions, banks and others were within the borrowing limits of the Company. Such borrowings were made by the Company in compliance with applicable laws. The break up of the Company's domestic borrowings were as detailed in Annexure ….. :
8. The Company has not defaulted in the repayment of public deposits, unsecured loans, debentures, facilities granted by banks, financial institutions and non-banking financial companies.
9. The Company has created, modified or satisfied charges on the assets of the company as detailed in Annexure…. Investments in wholly owned Subsidiaries and/or Joint Ventures abroad made by the company are as detailed in Annexure ……
10. Principal value of the forex exposure and Overseas Borrowings of the company as on ………… are as detailed in the Annexure under"
11. The Company has issued and allotted the securities to the persons-entitled thereto and has also issued letters, coupons, warrants and certificates thereof as applicable to the concerned persons and also redeemed its preference shares/debentures and bought back its shares within the stipulated time in compliance with the provisions of the Companies Act,1956 and other relevant statutes.
12. The Company has insured all its secured assets.
13. The Company has complied with the terms and conditions, set forth by the lending bank/financial institution at the time of availing any facility and also during the currency of the facility
14. The Company has declared and paid dividends to its shareholders as per the provisions of the Companies Act, 1956.
15. The Company has insured fully all its assets.
16. The name of the Company and or any of its Directors does not appear in the defaulters' list of Reserve Bank of India.
17. The name of the Company and or any of its Directors does not appear in the Specific Approval List of Export Credit Guarantee Corporation.
18. The Company has paid all its Statutory dues and satisfactory arrangements had been made for arrears of any such dues.
19. The funds borrowed from banks/financial institutions have been used by the company for the purpose for which they were borrowed.
20. The Company has complied with the provisions stipulated in Section 372 A of the Companies Act in respect of its Inter Corporate loans and investments.
21. It has been observed from the Reports of the Directors and the Auditors that the Company has complied with the applicable Accounting Standards issued by the Institute of Chartered Accountants in India.
22. The Company has credited and paid to the Investor Education and Protection Fund within the stipulated time, all the unpaid dividends and other amounts required to be so credited.
23. Prosecutions initiated against or show cause notices received by the Company for alleged defaults/offences under various statutory provisions and also fines and penalties imposed on the Company and or any other action initiated against the Company and /or its directors in such cases are detailed in Annexure….. .
24. The Company has (being a listed entity) complied with the provisions of the Listing Agreement.
25. The Company has deposited within the stipulated time both Employees' and Employer's contribution to Provident Fund with the prescribed authorities.
Note : The qualification, reservation or adverse remarks, if any, are explicitly stated may be stated at the relevant paragraphs above place(s).
Place: Signature:
Date: Name of Company Secretary/Firm:
C.P. No.:
ICWAI going truely Global !!!Kudos members Yes We can.
http://www.hindu.com/edu/2009/02/16/stories/2009021650440100.htm
Going global, ICWAI way
--------------------------------------------------------------------------------
The institute is exploring possibilities of tie-ups with counterparts in developed countries
--------------------------------------------------------------------------------
The fast-paced changes that are sweeping across the world in financial and accounting professions are posing new challenges to accountants in managerial and senior positions in the corporate world in the country. This has placed a new responsibility on the professional bodies that produce accountants to update the curriculum and bring it on a par with international standards.
The Institute of Cost and Works Accountants of India (ICWAI), which has sensed an urgency in this direction, has not only updated its curriculum with effect from January, 2008 and brought it on a par with the standards prescribed by the International Federation of Accountants (IFAC), but also started exploring the possibilities of entering into tie-ups with its counterparts in developed countries. This is mainly to ensure that the Indian accountants find acceptance by global business players like multinational companies.
CIMA tie-up
One such tie-up of great significance the ICWAI has entered into recently is with the Chartered Institute of Management Accountants (CIMA) of the United Kingdom, one of the oldest accounting bodies .
“The MoU with CIMA, UK heralds an era of opening-up for the Indian students. Never before did Indian students have an opportunity to attain international accounting recognition at such a fast pace,” says ICWAI president Kunal Banerjee.
The MoU, he explains, has provided for exemption of 11 of the total 14 papers in the CIMA examination for those who have qualified in the ICWAI examination. In what is called the ‘Gateway Scheme’, Indian students who have completed the ICWAI final examination can straightaway join the last level, of the CIMA examination.
“All they have to do is appear for a proficiency test called CIMA Professional Gateway Assessment (CPGA) by paying a fee of £40, which is half of what the CIMA charges for its own students,” Mr. Banerjee says.
He points out that the arrangement is also a great money-saver for Indian students, as they will have to pay a fee of £80 for each appearance of each of these three papers only. In normal course, Indian students desiring to complete the CIMA examination will have to pay £80 for each appearance of each of the 14 papers.
As a token of reciprocity, ICWAI has exempted CIMA-qualified persons from appearing for 12 of the total 18 papers. However, six papers dealing mainly with Indian corporate laws and related aspects, will have to be cleared.
Mr. Banerjee says there have been fruitful discussions with the Institute of Management Accountants (IMA), USA and the Certified Management Accountants (CMA), Canada for entering into ‘mutual recognition agreements’.
“The pact we propose to enter into with the IMA has been cleared by the Ministry of Corporate Affairs. The one with the CMA will be finalised by end of March,” he adds. The MoU will pave the way for direct reciprocal arrangement of granting membership.
K. SRIMALI
in Vijayawada
Going global, ICWAI way
--------------------------------------------------------------------------------
The institute is exploring possibilities of tie-ups with counterparts in developed countries
--------------------------------------------------------------------------------
The fast-paced changes that are sweeping across the world in financial and accounting professions are posing new challenges to accountants in managerial and senior positions in the corporate world in the country. This has placed a new responsibility on the professional bodies that produce accountants to update the curriculum and bring it on a par with international standards.
The Institute of Cost and Works Accountants of India (ICWAI), which has sensed an urgency in this direction, has not only updated its curriculum with effect from January, 2008 and brought it on a par with the standards prescribed by the International Federation of Accountants (IFAC), but also started exploring the possibilities of entering into tie-ups with its counterparts in developed countries. This is mainly to ensure that the Indian accountants find acceptance by global business players like multinational companies.
CIMA tie-up
One such tie-up of great significance the ICWAI has entered into recently is with the Chartered Institute of Management Accountants (CIMA) of the United Kingdom, one of the oldest accounting bodies .
“The MoU with CIMA, UK heralds an era of opening-up for the Indian students. Never before did Indian students have an opportunity to attain international accounting recognition at such a fast pace,” says ICWAI president Kunal Banerjee.
The MoU, he explains, has provided for exemption of 11 of the total 14 papers in the CIMA examination for those who have qualified in the ICWAI examination. In what is called the ‘Gateway Scheme’, Indian students who have completed the ICWAI final examination can straightaway join the last level, of the CIMA examination.
“All they have to do is appear for a proficiency test called CIMA Professional Gateway Assessment (CPGA) by paying a fee of £40, which is half of what the CIMA charges for its own students,” Mr. Banerjee says.
He points out that the arrangement is also a great money-saver for Indian students, as they will have to pay a fee of £80 for each appearance of each of these three papers only. In normal course, Indian students desiring to complete the CIMA examination will have to pay £80 for each appearance of each of the 14 papers.
As a token of reciprocity, ICWAI has exempted CIMA-qualified persons from appearing for 12 of the total 18 papers. However, six papers dealing mainly with Indian corporate laws and related aspects, will have to be cleared.
Mr. Banerjee says there have been fruitful discussions with the Institute of Management Accountants (IMA), USA and the Certified Management Accountants (CMA), Canada for entering into ‘mutual recognition agreements’.
“The pact we propose to enter into with the IMA has been cleared by the Ministry of Corporate Affairs. The one with the CMA will be finalised by end of March,” he adds. The MoU will pave the way for direct reciprocal arrangement of granting membership.
K. SRIMALI
in Vijayawada
Friday, January 30, 2009
Internal Audit of Stock Brokers
Training programme for internal audit of stock brokers
Training Programme for Internal Audit of Stock Brokers
Background
Periodical audit is one of the tools to ascertain the level of compliance among stock brokers of the exchanges. The scope of audit should cover the existence, scope and efficiency of the internal control system, compliance with the provisions of the SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956, SEBI (Stock brokers and Sub- brokers) Regulations, 1992, circulars issued by SEBI, agreements, KYC requirements, Bye-Laws of the Exchanges, data security and insurance in respect of the operations of the stock brokers/clearing members.
SEBI has issued circulars asking stock exchanges to direct stockbrokers/trading members/clearing members to carry out complete internal audit on a half yearly basis by chartered accountants, company secretaries or cost and management accountants who are in practice and who do not have any conflict of interest.
The programme
This executive education programme is offered by NISM, in co-ordination with BSE & NSE, for chartered accountants, cost accountants and company secretaries. It aims at helping them carry out effective internal audit of the broker’s books in order to satisfy the requirements of SEBI and the exchanges. The sessions discuss audit procedure and areas that the auditor should examine with references to what books, documents and data are to be checked. Programme faculty has been drawn from SEBI and the two main exchanges. Duration of the programme would be two days.
Offerings
There will be six programmes in Mumbai and two programmes each in Kolkata, New Delhi and Chennai. The dates for the six Mumbai offerings are given below. The dates of the other metro cities are yet to be finalized.
1. January 9&10, 2009 4. January 30&31, 2009
2. January 16&17, 2009 5. February 6&7, 2009
3. January 23&24, 2009 6. February 13&14, 2009
Programme fee
The programme fees would be Rs.2,250/- (for both days; inclusive of service tax) per participant. The programme fee covers courseware, lunch and tea for both days. A participant certificate will be given to all the participants.
Registration
For registration and other details kindly contact:
Training Programme for Internal Audit of Stock Brokers
Background
Periodical audit is one of the tools to ascertain the level of compliance among stock brokers of the exchanges. The scope of audit should cover the existence, scope and efficiency of the internal control system, compliance with the provisions of the SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956, SEBI (Stock brokers and Sub- brokers) Regulations, 1992, circulars issued by SEBI, agreements, KYC requirements, Bye-Laws of the Exchanges, data security and insurance in respect of the operations of the stock brokers/clearing members.
SEBI has issued circulars asking stock exchanges to direct stockbrokers/trading members/clearing members to carry out complete internal audit on a half yearly basis by chartered accountants, company secretaries or cost and management accountants who are in practice and who do not have any conflict of interest.
The programme
This executive education programme is offered by NISM, in co-ordination with BSE & NSE, for chartered accountants, cost accountants and company secretaries. It aims at helping them carry out effective internal audit of the broker’s books in order to satisfy the requirements of SEBI and the exchanges. The sessions discuss audit procedure and areas that the auditor should examine with references to what books, documents and data are to be checked. Programme faculty has been drawn from SEBI and the two main exchanges. Duration of the programme would be two days.
Offerings
There will be six programmes in Mumbai and two programmes each in Kolkata, New Delhi and Chennai. The dates for the six Mumbai offerings are given below. The dates of the other metro cities are yet to be finalized.
1. January 9&10, 2009 4. January 30&31, 2009
2. January 16&17, 2009 5. February 6&7, 2009
3. January 23&24, 2009 6. February 13&14, 2009
Programme fee
The programme fees would be Rs.2,250/- (for both days; inclusive of service tax) per participant. The programme fee covers courseware, lunch and tea for both days. A participant certificate will be given to all the participants.
Registration
For registration and other details kindly contact:
Saturday, May 12, 2007
Cost Audit to services-Extended by CBEC in the finance bill
Excise audits uptill now applicable to manufacturing unit has been extended to Services under the Service Tax.
Thursday, April 19, 2007
To Act As Company Secretary.
Companies (Appointment and Qualifications of Secretary) Rules, 1988
In exercise of the powers conferred by clauses (a) and (b) of section 642 read with clause
(45) of section 2 and section 383A of the Companies Act, 1956 (1 of 1956), and in
supersession of the Companies (Secretary's Qualifications) Rules, 1975, the Central
Government hereby makes the following Rules, namely :
1. Short title and commencement -
(1) These rules may be called the Companies (Appointment and Qualifications of
Secretary) Rules, 1988.
(2) It shall come into force on the 1st day of December, 1988.
2. Appointment, etc., of whole-time secretary -
(1) Every company having a paid-up share capital of not less than rupees fifty lakhs
shall have a whole-time secretary.
(2) No person shall be appointed as whole-time secretary under sub-rule (1) unless
he is a member of the Institute of Company Secretaries of India constituted under the
Company Secretaries Act, 1980 (56 of 1980).
(3) A company having a paid-up share capital of less than rupees fifty lakhs may
appoint any individual as its whole-time secretary to perform the duties of a
secretary under the Companies Act, 1956, and any other ministerial or administrative
duties :
Provided that no individual shall be eligible to be so appointed unless he possesses one or
more of the qualifications specified in sub-rule (4).
(4) No individual shall be appointed as secretary pursuant to sub-rule (3) unless he
possesses any one or more of the following qualifications, namely :-
(i) membership of the Institute of Company Secretaries of India constituted
under the Company Secretaries Act, 1980 (56 of 1980) ;
(ii) pass in the Intermediate examination conducted either by the Institute of
Company Secretaries of India constituted under the Company Secretaries Act,
1980 (No. 56 of 1980), or by the earlier Institute of Company Secretaries of
India incorporated on 4th October, 1968, under the Companies Act, 1956 (1 of
1956), and licensed under section 25 of that Act ;
(iii) Post-graduate degree in commerce or corporate secretary ship granted by
any university in India ;
(iv) degree in law granted by any university ;
(v) membership of the Institute of Chartered Accountants of India constituted
under the Chartered Accountants Act, 1949 (38 of 1949) ;
(vi) membership of the Institute of Cost and Works Accountants of India
constituted under the Cost and Works Accountants Act, 1959 (23 of 1959) ;
(vii) post-graduate degree or diploma in management sciences, granted by any
university, or the Institutes of Management, Ahmedabad, Calcutta, Bangalore
or Lucknow ;
(viii) post-graduate diploma in company secretary ship granted by the Institute
of Commercial Practice under the Delhi Administration or Diploma in
Corporate Laws and Management granted by the Indian Law Institute, New
Delhi ;
(ix) post-graduate diploma in company law and secretarial practice granted by
the University of Udaipur; or
(x) membership of the Association of Secretaries and Managers, Calcutta,
registered under the West Bengal Registration of Societies Act, 1961 (XXVI of
1961) :
Provided that where the paid-up share capital of such company is increased to rupees
twenty-five lakhs or more, the company shall, within a period of one year from the date
of such increase, comply with the provisions of sub-rules (1) and (2) of rule 2.
Explanation - In this rule, "University" has the meaning assigned to it in the University
Grants Commission Act, 1956 (No. 3 of 1956), and includes any university outside India
which is recognised by the Union Public Service Commission for the purposes of
recruitment to public services and posts in connection with the affairs of the Union or of
any State.
3. Provisions relating to existing secretaries -
Notwithstanding contained in sub-rules (1) and (2) of rule 2, the qualifications
possessed by a person holding the office of whole-time secretary of a company
immediately before 30th October, 1980, in terms of the second proviso to clause (a)
of rule 2 of the Companies (Secretaries Qualifications) Rules, 1975, shall be
deemed to be the qualifications which he shall be required to possess in order to be
eligible to continue as whole-time secretary in that company.
In exercise of the powers conferred by clauses (a) and (b) of section 642 read with clause
(45) of section 2 and section 383A of the Companies Act, 1956 (1 of 1956), and in
supersession of the Companies (Secretary's Qualifications) Rules, 1975, the Central
Government hereby makes the following Rules, namely :
1. Short title and commencement -
(1) These rules may be called the Companies (Appointment and Qualifications of
Secretary) Rules, 1988.
(2) It shall come into force on the 1st day of December, 1988.
2. Appointment, etc., of whole-time secretary -
(1) Every company having a paid-up share capital of not less than rupees fifty lakhs
shall have a whole-time secretary.
(2) No person shall be appointed as whole-time secretary under sub-rule (1) unless
he is a member of the Institute of Company Secretaries of India constituted under the
Company Secretaries Act, 1980 (56 of 1980).
(3) A company having a paid-up share capital of less than rupees fifty lakhs may
appoint any individual as its whole-time secretary to perform the duties of a
secretary under the Companies Act, 1956, and any other ministerial or administrative
duties :
Provided that no individual shall be eligible to be so appointed unless he possesses one or
more of the qualifications specified in sub-rule (4).
(4) No individual shall be appointed as secretary pursuant to sub-rule (3) unless he
possesses any one or more of the following qualifications, namely :-
(i) membership of the Institute of Company Secretaries of India constituted
under the Company Secretaries Act, 1980 (56 of 1980) ;
(ii) pass in the Intermediate examination conducted either by the Institute of
Company Secretaries of India constituted under the Company Secretaries Act,
1980 (No. 56 of 1980), or by the earlier Institute of Company Secretaries of
India incorporated on 4th October, 1968, under the Companies Act, 1956 (1 of
1956), and licensed under section 25 of that Act ;
(iii) Post-graduate degree in commerce or corporate secretary ship granted by
any university in India ;
(iv) degree in law granted by any university ;
(v) membership of the Institute of Chartered Accountants of India constituted
under the Chartered Accountants Act, 1949 (38 of 1949) ;
(vi) membership of the Institute of Cost and Works Accountants of India
constituted under the Cost and Works Accountants Act, 1959 (23 of 1959) ;
(vii) post-graduate degree or diploma in management sciences, granted by any
university, or the Institutes of Management, Ahmedabad, Calcutta, Bangalore
or Lucknow ;
(viii) post-graduate diploma in company secretary ship granted by the Institute
of Commercial Practice under the Delhi Administration or Diploma in
Corporate Laws and Management granted by the Indian Law Institute, New
Delhi ;
(ix) post-graduate diploma in company law and secretarial practice granted by
the University of Udaipur; or
(x) membership of the Association of Secretaries and Managers, Calcutta,
registered under the West Bengal Registration of Societies Act, 1961 (XXVI of
1961) :
Provided that where the paid-up share capital of such company is increased to rupees
twenty-five lakhs or more, the company shall, within a period of one year from the date
of such increase, comply with the provisions of sub-rules (1) and (2) of rule 2.
Explanation - In this rule, "University" has the meaning assigned to it in the University
Grants Commission Act, 1956 (No. 3 of 1956), and includes any university outside India
which is recognised by the Union Public Service Commission for the purposes of
recruitment to public services and posts in connection with the affairs of the Union or of
any State.
3. Provisions relating to existing secretaries -
Notwithstanding contained in sub-rules (1) and (2) of rule 2, the qualifications
possessed by a person holding the office of whole-time secretary of a company
immediately before 30th October, 1980, in terms of the second proviso to clause (a)
of rule 2 of the Companies (Secretaries Qualifications) Rules, 1975, shall be
deemed to be the qualifications which he shall be required to possess in order to be
eligible to continue as whole-time secretary in that company.
Sunday, March 04, 2007
Legal Representatives for Appelate tribunal
Right to legal representations
22C. The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers or present his or its case before the Securities Appellate Tribunal.
Explanation. - For the purposes of this section, -
1. "chartered accountant" means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
2. "company secretary" means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
3. "cost accountant" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
4. "legal practitioner" means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.40
22C. The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers or present his or its case before the Securities Appellate Tribunal.
Explanation. - For the purposes of this section, -
1. "chartered accountant" means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
2. "company secretary" means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
3. "cost accountant" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
4. "legal practitioner" means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.40
Valuation in Banks RBI
RBI No.2006-2007/224
DBOD.BP.BC No. 50 / 21.04.018/ 2006-07
January 4, 2007
The Chairmen/Chief Executives
All Commercial Banks
(excluding RRBs)
Dear Sir,
Valuation of Properties - Empanelment of Valuers
It has been observed that different banks follow different policies
for valuation of properties and appointment of valuers for the
purpose. The issue of correct and realistic valuation of fixed assets
owned by banks and that accepted by them as collateral for a sizable
portion of their advances portfolio assumes significance in view of
its implications for correct measurement of capital adequacy position
of banks. In this context, there is a need for putting in place a
system/procedure for realistic valuation of fixed assets and also for
empanelment of valuers for the purpose.
2. Banks may be guided by the following aspects while formulating a
policy on valuation of properties and appointment of valuers:
(a) Policy for valuation of properties
i) Banks should have a Board approved policy in place for valuation of
properties including collaterals accepted for their exposures.
ii) The valuation should be done by professionally qualified
independent valuers i.e. the valuer should not have a direct or
indirect interest.
iii) The banks should obtain minimum two Independent Valuation Reports
for properties valued at Rs.50 crore or above.
(b) Revaluation of bank’s own properties
In addition to the above, the banks may keep the following aspects in
view while formulating policy for revaluation of their own properties.
i) The extant guidelines on Capital Adequacy permit banks to include
revaluation reserves at a discount of 55% as a part of Tier II
Capital. In view of this, it is necessary that revaluation reserves
represent true appreciation in the market value of the properties and
banks have in place a comprehensive policy for revaluation of fixed
assets owned by them. Such a policy should interalia cover procedure
for identification of assets for revaluation, maintenance of separate
set of records for such assets, the frequency of revaluation,
depreciation policy for such assets, policy for sale of such revalued
assets etc. The policy should also cover the disclosure required to be
made in the 'Notes on Account' regarding the details of revaluation
such as the original cost of the fixed assets subject to revaluation
and accounting treatment for appreciation / depreciation etc.
ii) As the revaluation should reflect the change in the fair value of
the fixed asset, the frequency of revaluation should be determined
based on the observed volatility in the prices of the assets in the
past. Further, any change in the method of depreciation should reflect
the change in the expected pattern of consumption of the future
economic benefits of the assets. The banks should adhere to these
principles meticulously while changing the frequency of
revaluation/method of depreciation for a particular class of asset and
should make proper disclosures in this regard.
(c) Policy for Empanelment of Independent valuers
i) Banks should have a procedure for empanelment of professional
valuers and maintain a register of 'approved list of valuers'.
ii) Banks may prescribe a minimum qualification for empanelment of
valuers. Different qualifications may be prescribed for different
classes of assets (e.g. land and building, plant and machinery,
agricultural land, etc.). While prescribing the qualification, banks
may take into consideration the qualifications prescribed under
Section 34AB (Rule 8A) of the Wealth Tax Act, 1957.
3. Banks may also be guided by the relevant Accounting Standard issued
by the Institute of Chartered Accountants of India.
Registration of valuers.
34AB. (1) The 32[Chief Commissioner or Director General] shall
maintain a register to be called the Register of Valuers in which
shall be entered the names and addresses of persons registered under
sub-section (2) as valuers.
(2) Any person who possesses the qualifications prescribed33 in this
behalf may apply to the 34[Chief Commissioner or Director General] in
the prescribed form35 for being registered as a valuer under this section:
Provided that different qualifications may be prescribed for valuers
of different classes of assets.
36(3) Every application under sub-section (2) shall be verified in the
prescribed manner, shall be accompanied by such fees as may be
prescribed and shall contain a declaration to the effect that the
applicant will
(i) make an impartial and true valuation of any asset which he may be
required to value;
(ii) furnish a report of such valuation in the prescribed form;
(iii) charge fees at a rate not exceeding the rate or rates prescribed
in this behalf;
(iv) not undertake valuation of any asset in which he has a direct or
indirect interest.
37(4) The report of valuation of any asset by a registered valuer
shall be in the prescribed form and be verified in the prescribed manner.
Qualifications of registered valuers.
8A. (1) For the purposes of sub-section (2) of section 34AB, the
qualifications for registration as valuers of different classes of
asset shall be as specified in sub-rules (2) to (11).
(7) A valuer of stocks, shares, debentures, securities, shares in
partnership firms and of business assets, including goodwill but
excluding those referred to in sub-rules (2) to (6) and (8) to (11),
shall have the following qualifications, namely :
(i) he must be a member of the Institute of Chartered Accountants of
India or the Institute of Cost and Works Accountants of India 62[or
the Institute of Company Secretaries of India]; and
(ii) 63[(A) he must have been in practice as a chartered accountant or
a cost and works accountant or a company secretary for a period of not
less than ten years and his gross receipts from such practice should
not be less than fifty thousand rupees in any three of the five
preceding years, or]
(B) he must be a person formerly employed
(a) in a post under Government as a gazetted officer, or
(b) in a post under any other employer carrying a remuneration of not
less than Rs. 64[2,000] per month,
and, in either case, must have retired or resigned from such
employment after having rendered service for a period of not less than
65[ten] years in the field of audit and accounts or taxation work 66[, or]
66[(c) as a Company Secretary 67[or a Deputy Company Secretary] or an
Assistant Company Secretary in a post carrying a remuneration of not
less than Rs. 68[2,000] per month and must have retired or resigned
from such employment after having rendered service for a period of not
less than 69[ten] years.]
DBOD.BP.BC No. 50 / 21.04.018/ 2006-07
January 4, 2007
The Chairmen/Chief Executives
All Commercial Banks
(excluding RRBs)
Dear Sir,
Valuation of Properties - Empanelment of Valuers
It has been observed that different banks follow different policies
for valuation of properties and appointment of valuers for the
purpose. The issue of correct and realistic valuation of fixed assets
owned by banks and that accepted by them as collateral for a sizable
portion of their advances portfolio assumes significance in view of
its implications for correct measurement of capital adequacy position
of banks. In this context, there is a need for putting in place a
system/procedure for realistic valuation of fixed assets and also for
empanelment of valuers for the purpose.
2. Banks may be guided by the following aspects while formulating a
policy on valuation of properties and appointment of valuers:
(a) Policy for valuation of properties
i) Banks should have a Board approved policy in place for valuation of
properties including collaterals accepted for their exposures.
ii) The valuation should be done by professionally qualified
independent valuers i.e. the valuer should not have a direct or
indirect interest.
iii) The banks should obtain minimum two Independent Valuation Reports
for properties valued at Rs.50 crore or above.
(b) Revaluation of bank’s own properties
In addition to the above, the banks may keep the following aspects in
view while formulating policy for revaluation of their own properties.
i) The extant guidelines on Capital Adequacy permit banks to include
revaluation reserves at a discount of 55% as a part of Tier II
Capital. In view of this, it is necessary that revaluation reserves
represent true appreciation in the market value of the properties and
banks have in place a comprehensive policy for revaluation of fixed
assets owned by them. Such a policy should interalia cover procedure
for identification of assets for revaluation, maintenance of separate
set of records for such assets, the frequency of revaluation,
depreciation policy for such assets, policy for sale of such revalued
assets etc. The policy should also cover the disclosure required to be
made in the 'Notes on Account' regarding the details of revaluation
such as the original cost of the fixed assets subject to revaluation
and accounting treatment for appreciation / depreciation etc.
ii) As the revaluation should reflect the change in the fair value of
the fixed asset, the frequency of revaluation should be determined
based on the observed volatility in the prices of the assets in the
past. Further, any change in the method of depreciation should reflect
the change in the expected pattern of consumption of the future
economic benefits of the assets. The banks should adhere to these
principles meticulously while changing the frequency of
revaluation/method of depreciation for a particular class of asset and
should make proper disclosures in this regard.
(c) Policy for Empanelment of Independent valuers
i) Banks should have a procedure for empanelment of professional
valuers and maintain a register of 'approved list of valuers'.
ii) Banks may prescribe a minimum qualification for empanelment of
valuers. Different qualifications may be prescribed for different
classes of assets (e.g. land and building, plant and machinery,
agricultural land, etc.). While prescribing the qualification, banks
may take into consideration the qualifications prescribed under
Section 34AB (Rule 8A) of the Wealth Tax Act, 1957.
3. Banks may also be guided by the relevant Accounting Standard issued
by the Institute of Chartered Accountants of India.
Registration of valuers.
34AB. (1) The 32[Chief Commissioner or Director General] shall
maintain a register to be called the Register of Valuers in which
shall be entered the names and addresses of persons registered under
sub-section (2) as valuers.
(2) Any person who possesses the qualifications prescribed33 in this
behalf may apply to the 34[Chief Commissioner or Director General] in
the prescribed form35 for being registered as a valuer under this section:
Provided that different qualifications may be prescribed for valuers
of different classes of assets.
36(3) Every application under sub-section (2) shall be verified in the
prescribed manner, shall be accompanied by such fees as may be
prescribed and shall contain a declaration to the effect that the
applicant will
(i) make an impartial and true valuation of any asset which he may be
required to value;
(ii) furnish a report of such valuation in the prescribed form;
(iii) charge fees at a rate not exceeding the rate or rates prescribed
in this behalf;
(iv) not undertake valuation of any asset in which he has a direct or
indirect interest.
37(4) The report of valuation of any asset by a registered valuer
shall be in the prescribed form and be verified in the prescribed manner.
Qualifications of registered valuers.
8A. (1) For the purposes of sub-section (2) of section 34AB, the
qualifications for registration as valuers of different classes of
asset shall be as specified in sub-rules (2) to (11).
(7) A valuer of stocks, shares, debentures, securities, shares in
partnership firms and of business assets, including goodwill but
excluding those referred to in sub-rules (2) to (6) and (8) to (11),
shall have the following qualifications, namely :
(i) he must be a member of the Institute of Chartered Accountants of
India or the Institute of Cost and Works Accountants of India 62[or
the Institute of Company Secretaries of India]; and
(ii) 63[(A) he must have been in practice as a chartered accountant or
a cost and works accountant or a company secretary for a period of not
less than ten years and his gross receipts from such practice should
not be less than fifty thousand rupees in any three of the five
preceding years, or]
(B) he must be a person formerly employed
(a) in a post under Government as a gazetted officer, or
(b) in a post under any other employer carrying a remuneration of not
less than Rs. 64[2,000] per month,
and, in either case, must have retired or resigned from such
employment after having rendered service for a period of not less than
65[ten] years in the field of audit and accounts or taxation work 66[, or]
66[(c) as a Company Secretary 67[or a Deputy Company Secretary] or an
Assistant Company Secretary in a post carrying a remuneration of not
less than Rs. 68[2,000] per month and must have retired or resigned
from such employment after having rendered service for a period of not
less than 69[ten] years.]
Friday, January 26, 2007
Depositaries act
23C. Right to legal representation. — The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal.
Explanation. — For the purposes of this section, —
(a) ';chartered accountant'; means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act:
(b) ';company secretary'; means a company secretary as defined in clause (c) os sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(c) ';cost accountant'; means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(d) ';legal practitioner'; means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.
Securities contracts regulation act
22C. Right to legal representation. — The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal.
Explanation. — For the purposes of this section, —
(a) ';chartered accountant'; means chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(b) ';company secretary'; means a company secretary as defined in clause (c) of sub-section (10 of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(c) ';cost accountant'; means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(d) ';legal practitioner'; means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.
22D. Limitation. — The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an appeal made a to a Securities Appellate Tribunal.
Cost Audit in Global Perspective-Emerging Global economic order and the relevance of Cost records.
Cost Audit –Here to stay in a Global perspective.
Maintenance of Cost records and Audit of the same has been in India since long and
recognized in the companies act 1956 by an amendment in 1965.The main intention
of the legislature was laying emphasis on controlling cost and setting up an
administrative pricing mechanism to protect the interest of the society.
Its emphasis is manifold unlike maintenance of financial records and its audit year on
year basis. While financial accountants addresses the needs of owner partially they
seldom address the interests of the society at large. In this context Maintenance of cost
records through a compliance mechanism has to travel a longway since the same is not
yet compulsory across board among companies(exemption to small scale sector)across
sectors(services and agriculture still to take up)Regularity(audit depends on order from
CAB even when Cost records maintenance is made compulsory)Accounts not certified by
qualified cost accountant(where Audit is not ordered ).
In the above back drop let us discuss few lines about the hype created in the Industry
circle about abolition of cost audit in global perspective.
First of all one must understand that maintenance of records reflecting cost of production
and services is the primary need for any business and in the global scenario it is all the
more vital .Unlike formatted financial accounts, which lay emphasis on recording of
transaction in a double entry mode, Cost accounts concentrate on business process
through a planning mechanism(budget) setting up of standards for physical and financial
incurrence(thus an inclusive mechanism of financial and non-financial measure) and
records transaction in a double entry mode to reflect a true and fair view for business
sustenance and growth.Its vision covers the interests of all internal and external
stakeholder and thus all encompassing.
Cost accounting is, State of Economy-Neutral, in the sense it does not simply focus on
recording transactions to claim such a neutrality while it addresses issues of economic
prosperity, its sustenance, through resource planning and overall growth
perspective(through enabling business process re-engineering) in the global arena.
Be it Capitalist Mode where Money is driving growth{(Optimising the yield from
investment is primary concern through internal(Process efficiency ) and
external(Delivery end-to-end and Income maximization) re-engineering)}.Be it Socialist
which lay emphasis on Planning process for resource allocation and egalitarian approach
to push a sustainable growth forward.
It is sector neutral since there is a longstanding and a reliable relation between money and
its exchange(Goods and services) and Cost is relational parameter for measuring value to
a business.
It impacts business cycle and prolongs the process, if not , completely plug the process
of concentration of economic power by checking the system and allowing efficient
process to flow thereby protecting the stakeholders from vagaries of business cycle.
It is something related to good governance and fair practices in “business and
governance of the economy “and can be defined for all the socio-economic setup and is a
very dynamic tool for measuring growth and efficiency.
The relevance of the stakeholders is better addressed in a liberalized and global setup
than a controlled setup and the relevance of cost accounting in the emerging world order
can only be better emphasized by looking into the global consumer and business
perspective. Infact the global scenario has complicated the economics of scale and
resource consumption specially, the speed of delivery, that we need to fall back on cost
accounting as addressing the whole range of issues that are the expectation of community
of nations.
Cost accounting is” Forms of business” neutral in that it addresses the core issues of
Value engineering for recording of transaction and has the business perspective, rather
than simply counting numbers it grows numbers and directs a sustainable growth in the
economy.
In the light of what has been stated above it is highly relevant and utmost imperative to
infuse the culture of recording transaction in the cost accounting mode transcending
business territories , economic model adopted by the state and the forms of business and
also in the governance of the economy.
In this context Indian economy had made a good beginning way back in 1965 and if the
realization of social-cost benefit is percolated down the line and addresses individual
citizens perspective in the society that is well geared in a political setup where
individual citizen has the right of choice to elect the representative to govern the society
and the resources, which is of common concern ,and the business model and any
economic activity is, that of exploitation of resources owned in equal measure of right
and opportunity by every citizen of India, then the agency factor comes alive for any
exploitors who come to the forefront of such activity and hence they are liable not only to
their business interest but also to the community interest and in that Cost accounting is a
potent tool of measurement. The object of competition and free movement of goods and
services is to plug inefficiency in global perspective and improve efficient delivery model
and these can seldom be addressed by financial statements of Profit and loss account
and balance sheet.
Having discussed at length of the requirement of cost accounting in the global economic
scenario we will now deal with what can be the way ahead from the stakeholders
perspective. These are recommendations to march ahead.
1.IFAC a world body of accountants which has yet far concentrated on the management
accounting issues should be geared with the might of Management accounting bodies to
come up with Statements of management accounting practice that is “economy, sector
and business forms neutral” which addresses the triple bottom line issues in global
perspective.
2.ICWAI in its interest and in the interest of stakeholders at large become proactive in
the delivery model (end to end) to percolate cost consciousness and other management
accounting related issues. It should come with policy guidelines that will push forward
reforms in accounting practices in the Indian context. It should also ensure quality man
power is made available in five years from now positioning the management accounting
model where the demand could be anywhere between 500000 to 1000000.
3.The GOI should become proactive and also come with a policy paper on the Inclusive
accounting aspect(financial and management accounting) addressing socio-economic
model of sustainable growth. It should re-position the role of Management accountant
as a Public accountants on par with Chartered accountants in all spheres of economic
activity and encourage them to participate in the process of maintenance of accounts and
audit in all forms of business and in government specially Taxation and budgeting
aspect.It should also shift away from the belief that ICAI is be all and end all of
Accounting and auditing profession.
4.Various economic legislation should define the role of Management accountant
clearly addressing the needs of our society.
Specific issues that needs to be re looked and amendments sought are:
1.Companies act should make a provision for Compulsory maintenance of cost records
for all businesses registered with it and allow audit on par with Statutory financial audit.
The cost auditor should submit its report to the Board and where after a gist can be
presented before the AGM.
2.All other forms of business where specific legislation is available should have
compulsory maintenance of cost records as a mandatory provision.
3.TAX departments should extensively use the services of Cost and Management
accountants in the process of collection of tax revenue.A process of auditing cost records
should be in place to ascertain exact cost of transaction and true determination of Income.
4.Government should recognize the true potential of Cost and management accountants
and employ them under ICAS or in consultancy assignments as an expert in social-cost
benefit analysis. The services should also be utilized in various regulatory frame work
that is coming up in administrative ministries for determination of fair price and
efficiency parameters.
CMA.R.Veeraraghavan
Maintenance of Cost records and Audit of the same has been in India since long and
recognized in the companies act 1956 by an amendment in 1965.The main intention
of the legislature was laying emphasis on controlling cost and setting up an
administrative pricing mechanism to protect the interest of the society.
Its emphasis is manifold unlike maintenance of financial records and its audit year on
year basis. While financial accountants addresses the needs of owner partially they
seldom address the interests of the society at large. In this context Maintenance of cost
records through a compliance mechanism has to travel a longway since the same is not
yet compulsory across board among companies(exemption to small scale sector)across
sectors(services and agriculture still to take up)Regularity(audit depends on order from
CAB even when Cost records maintenance is made compulsory)Accounts not certified by
qualified cost accountant(where Audit is not ordered ).
In the above back drop let us discuss few lines about the hype created in the Industry
circle about abolition of cost audit in global perspective.
First of all one must understand that maintenance of records reflecting cost of production
and services is the primary need for any business and in the global scenario it is all the
more vital .Unlike formatted financial accounts, which lay emphasis on recording of
transaction in a double entry mode, Cost accounts concentrate on business process
through a planning mechanism(budget) setting up of standards for physical and financial
incurrence(thus an inclusive mechanism of financial and non-financial measure) and
records transaction in a double entry mode to reflect a true and fair view for business
sustenance and growth.Its vision covers the interests of all internal and external
stakeholder and thus all encompassing.
Cost accounting is, State of Economy-Neutral, in the sense it does not simply focus on
recording transactions to claim such a neutrality while it addresses issues of economic
prosperity, its sustenance, through resource planning and overall growth
perspective(through enabling business process re-engineering) in the global arena.
Be it Capitalist Mode where Money is driving growth{(Optimising the yield from
investment is primary concern through internal(Process efficiency ) and
external(Delivery end-to-end and Income maximization) re-engineering)}.Be it Socialist
which lay emphasis on Planning process for resource allocation and egalitarian approach
to push a sustainable growth forward.
It is sector neutral since there is a longstanding and a reliable relation between money and
its exchange(Goods and services) and Cost is relational parameter for measuring value to
a business.
It impacts business cycle and prolongs the process, if not , completely plug the process
of concentration of economic power by checking the system and allowing efficient
process to flow thereby protecting the stakeholders from vagaries of business cycle.
It is something related to good governance and fair practices in “business and
governance of the economy “and can be defined for all the socio-economic setup and is a
very dynamic tool for measuring growth and efficiency.
The relevance of the stakeholders is better addressed in a liberalized and global setup
than a controlled setup and the relevance of cost accounting in the emerging world order
can only be better emphasized by looking into the global consumer and business
perspective. Infact the global scenario has complicated the economics of scale and
resource consumption specially, the speed of delivery, that we need to fall back on cost
accounting as addressing the whole range of issues that are the expectation of community
of nations.
Cost accounting is” Forms of business” neutral in that it addresses the core issues of
Value engineering for recording of transaction and has the business perspective, rather
than simply counting numbers it grows numbers and directs a sustainable growth in the
economy.
In the light of what has been stated above it is highly relevant and utmost imperative to
infuse the culture of recording transaction in the cost accounting mode transcending
business territories , economic model adopted by the state and the forms of business and
also in the governance of the economy.
In this context Indian economy had made a good beginning way back in 1965 and if the
realization of social-cost benefit is percolated down the line and addresses individual
citizens perspective in the society that is well geared in a political setup where
individual citizen has the right of choice to elect the representative to govern the society
and the resources, which is of common concern ,and the business model and any
economic activity is, that of exploitation of resources owned in equal measure of right
and opportunity by every citizen of India, then the agency factor comes alive for any
exploitors who come to the forefront of such activity and hence they are liable not only to
their business interest but also to the community interest and in that Cost accounting is a
potent tool of measurement. The object of competition and free movement of goods and
services is to plug inefficiency in global perspective and improve efficient delivery model
and these can seldom be addressed by financial statements of Profit and loss account
and balance sheet.
Having discussed at length of the requirement of cost accounting in the global economic
scenario we will now deal with what can be the way ahead from the stakeholders
perspective. These are recommendations to march ahead.
1.IFAC a world body of accountants which has yet far concentrated on the management
accounting issues should be geared with the might of Management accounting bodies to
come up with Statements of management accounting practice that is “economy, sector
and business forms neutral” which addresses the triple bottom line issues in global
perspective.
2.ICWAI in its interest and in the interest of stakeholders at large become proactive in
the delivery model (end to end) to percolate cost consciousness and other management
accounting related issues. It should come with policy guidelines that will push forward
reforms in accounting practices in the Indian context. It should also ensure quality man
power is made available in five years from now positioning the management accounting
model where the demand could be anywhere between 500000 to 1000000.
3.The GOI should become proactive and also come with a policy paper on the Inclusive
accounting aspect(financial and management accounting) addressing socio-economic
model of sustainable growth. It should re-position the role of Management accountant
as a Public accountants on par with Chartered accountants in all spheres of economic
activity and encourage them to participate in the process of maintenance of accounts and
audit in all forms of business and in government specially Taxation and budgeting
aspect.It should also shift away from the belief that ICAI is be all and end all of
Accounting and auditing profession.
4.Various economic legislation should define the role of Management accountant
clearly addressing the needs of our society.
Specific issues that needs to be re looked and amendments sought are:
1.Companies act should make a provision for Compulsory maintenance of cost records
for all businesses registered with it and allow audit on par with Statutory financial audit.
The cost auditor should submit its report to the Board and where after a gist can be
presented before the AGM.
2.All other forms of business where specific legislation is available should have
compulsory maintenance of cost records as a mandatory provision.
3.TAX departments should extensively use the services of Cost and Management
accountants in the process of collection of tax revenue.A process of auditing cost records
should be in place to ascertain exact cost of transaction and true determination of Income.
4.Government should recognize the true potential of Cost and management accountants
and employ them under ICAS or in consultancy assignments as an expert in social-cost
benefit analysis. The services should also be utilized in various regulatory frame work
that is coming up in administrative ministries for determination of fair price and
efficiency parameters.
CMA.R.Veeraraghavan
TRAI-Account separation and the role of cost and management accountant
4. Reports - (1) Based on the information available in the books of accounts and
other documents specified in the Rules and the order/notification issued there
under, service provider shall prepare geographical area-wise following financial
and non-financial reports: -
Financial Reports
Profit and Loss Statements
(i) Profit and loss statement of the products mentioned in column (4)
against services rendered by the service providers specified in column
(2) of the Schedule I. The statement shall be prepared in the Proforma
“A” of Schedule III;
(ii) Separate Profit and Loss statement for each of the service rendered by
the service provider and specified in regulation 1(2). The statement
shall be prepared in the Proforma “B” of Schedule III;
Page 5
Product Cost Statement
(iii) Product wise Cost Sheet in the Proforma “C” of Schedule III;
Network Element Cost Statements
(iv) Network Element wise Cost Sheet shall be prepared which clearly
indicates cost and its allocation to various products. An indicative list
of Network elements of services for which these cost sheets shall be
prepared is at Schedule II. However, the list of network elements shall
depend on network architecture used by the service provider. The
Network Element Cost Statements shall be prepared in the Proforma
“D” of Schedule III;
(v) A summary sheet showing network element wise total cost, cost driver
and cost per unit of usage. The statement shall be prepared in Proforma
“E” of Schedule III;
(vi) A summary sheet indicating network element wise cost allocated to
various products. The statement shall be prepared in Proforma “F” of
Schedule III;
Capital Employed Statements
(vii) Capital Employed Statement for each of the service rendered by the
service provider and specified in regulation 1(2). The statement shall
be prepared in Proforma “G” of Schedule III;
(viii) A statement showing allocation of capital employed for a service to the
network elements. The statement shall be prepared in Proforma “H” of
Schedule III;
Fixed Asset Statement
(ix) Statement showing category wise fixed assets and depreciation in the
Proforma “I” of Schedule III’; and
Non-Financial Report
(x) A statement of operational data relating to network architecture,
network usage, network capacity, product, services volumes, tariffs,
etc. Reports for services mentioned in Regulation 1(2) shall be
prepared in Proformae “L” to “T” of Schedule III.
(2) The service providers shall prepare Reports mentioned in Regulation 4 (1) every
year on the basis of historical cost accounting and every second year on the basis
of replacement cost accounting:
Provided that if less than three years have elapsed since issue of the license to
provide a particular service, the financial statements based on Replacement Cost
Accounting may not be prepared for that service.
Page 6
(3) The profit and loss statement and capital employed statement mentioned under
Regulation 4(1) of this regulation prepared on the basis of the Historical cost
Accounting shall be reconciled with the Annual Financial Statement of the
service provider prepared under Section 211 of the Companies Act, 1956. The
reconciliation statements shall be prepared in Proformae J and K of Schedule III.
(4) The service providers shall prepare financial reports mentioned in regulation
4(1) on the basis of replacement cost accounting, by-
(i) following financial capital maintenance methodology;
(ii) limiting cost adjustment to the fixed assets;
(iii) ignoring replacement cost adjustment for assets having life of less
than 3 years;
(iv) taking cost of modern equivalent asset when existing asset is not
available due to change in technology. Whenever, old asset is
replaced by modern equivalent asset, change in operational
expenditure as a result of such replacement shall also be accounted
for; and
(v) clearly indicating holding gain or loss, supplementary depreciation
and change in the operational cost due to replacement of old asset by
modern equivalent asset.
5. Periodicity of submission of report � (1) The service providers
shall submit
audited reports based on the historical cost accounting every year
within six
months of the end of accounting year to the Authority.
(2) The service provider shall also submit reports based on the
replacement cost
accounting every second year within six months of the end of
accounting year to
the Authority.
(3) The reporting period shall be same as followed by the company for
preparation
of the annual financial accounts under sub section (4) of section 210
of the
Companies Act, 1956.
Provided that, if reporting period exceeds fifteen calendar months,
the accounting
separation statements shall be divided into 12 months and the balance
period.
6. Audit - (1) Every service provider, to which these regulations
apply, shall appoint
an auditor who is qualified for appointment as an auditor under
section 224 or
233-B of The Companies Act, 1956.
(2) The auditor shall audit the reports so prepared.
(3) The auditor in his report shall express an opinion as to whether
the reports
have been properly drawn in accordance with the regulation and he has
received
all information and explanation necessary for the purpose of audit.
7. Confidentiality - The Authority shall ensure the confidentiality of
the financial
information submitted under various provisions of the Regulation.
Page 7
Provided that, where the Authority is of the opinion that it is
necessary or
expedient to disclose the information in public interest, it may, for
reasons to be
recorded in writing, do so.
Provided further that no information shall be disclosed by the
Authority, except
after giving the company an opportunity of making such representation
in writing,
as it may wish to make in that behalf and taking such representation into
consideration.
other documents specified in the Rules and the order/notification issued there
under, service provider shall prepare geographical area-wise following financial
and non-financial reports: -
Financial Reports
Profit and Loss Statements
(i) Profit and loss statement of the products mentioned in column (4)
against services rendered by the service providers specified in column
(2) of the Schedule I. The statement shall be prepared in the Proforma
“A” of Schedule III;
(ii) Separate Profit and Loss statement for each of the service rendered by
the service provider and specified in regulation 1(2). The statement
shall be prepared in the Proforma “B” of Schedule III;
Page 5
Product Cost Statement
(iii) Product wise Cost Sheet in the Proforma “C” of Schedule III;
Network Element Cost Statements
(iv) Network Element wise Cost Sheet shall be prepared which clearly
indicates cost and its allocation to various products. An indicative list
of Network elements of services for which these cost sheets shall be
prepared is at Schedule II. However, the list of network elements shall
depend on network architecture used by the service provider. The
Network Element Cost Statements shall be prepared in the Proforma
“D” of Schedule III;
(v) A summary sheet showing network element wise total cost, cost driver
and cost per unit of usage. The statement shall be prepared in Proforma
“E” of Schedule III;
(vi) A summary sheet indicating network element wise cost allocated to
various products. The statement shall be prepared in Proforma “F” of
Schedule III;
Capital Employed Statements
(vii) Capital Employed Statement for each of the service rendered by the
service provider and specified in regulation 1(2). The statement shall
be prepared in Proforma “G” of Schedule III;
(viii) A statement showing allocation of capital employed for a service to the
network elements. The statement shall be prepared in Proforma “H” of
Schedule III;
Fixed Asset Statement
(ix) Statement showing category wise fixed assets and depreciation in the
Proforma “I” of Schedule III’; and
Non-Financial Report
(x) A statement of operational data relating to network architecture,
network usage, network capacity, product, services volumes, tariffs,
etc. Reports for services mentioned in Regulation 1(2) shall be
prepared in Proformae “L” to “T” of Schedule III.
(2) The service providers shall prepare Reports mentioned in Regulation 4 (1) every
year on the basis of historical cost accounting and every second year on the basis
of replacement cost accounting:
Provided that if less than three years have elapsed since issue of the license to
provide a particular service, the financial statements based on Replacement Cost
Accounting may not be prepared for that service.
Page 6
(3) The profit and loss statement and capital employed statement mentioned under
Regulation 4(1) of this regulation prepared on the basis of the Historical cost
Accounting shall be reconciled with the Annual Financial Statement of the
service provider prepared under Section 211 of the Companies Act, 1956. The
reconciliation statements shall be prepared in Proformae J and K of Schedule III.
(4) The service providers shall prepare financial reports mentioned in regulation
4(1) on the basis of replacement cost accounting, by-
(i) following financial capital maintenance methodology;
(ii) limiting cost adjustment to the fixed assets;
(iii) ignoring replacement cost adjustment for assets having life of less
than 3 years;
(iv) taking cost of modern equivalent asset when existing asset is not
available due to change in technology. Whenever, old asset is
replaced by modern equivalent asset, change in operational
expenditure as a result of such replacement shall also be accounted
for; and
(v) clearly indicating holding gain or loss, supplementary depreciation
and change in the operational cost due to replacement of old asset by
modern equivalent asset.
5. Periodicity of submission of report � (1) The service providers
shall submit
audited reports based on the historical cost accounting every year
within six
months of the end of accounting year to the Authority.
(2) The service provider shall also submit reports based on the
replacement cost
accounting every second year within six months of the end of
accounting year to
the Authority.
(3) The reporting period shall be same as followed by the company for
preparation
of the annual financial accounts under sub section (4) of section 210
of the
Companies Act, 1956.
Provided that, if reporting period exceeds fifteen calendar months,
the accounting
separation statements shall be divided into 12 months and the balance
period.
6. Audit - (1) Every service provider, to which these regulations
apply, shall appoint
an auditor who is qualified for appointment as an auditor under
section 224 or
233-B of The Companies Act, 1956.
(2) The auditor shall audit the reports so prepared.
(3) The auditor in his report shall express an opinion as to whether
the reports
have been properly drawn in accordance with the regulation and he has
received
all information and explanation necessary for the purpose of audit.
7. Confidentiality - The Authority shall ensure the confidentiality of
the financial
information submitted under various provisions of the Regulation.
Page 7
Provided that, where the Authority is of the opinion that it is
necessary or
expedient to disclose the information in public interest, it may, for
reasons to be
recorded in writing, do so.
Provided further that no information shall be disclosed by the
Authority, except
after giving the company an opportunity of making such representation
in writing,
as it may wish to make in that behalf and taking such representation into
consideration.
Thursday, October 26, 2006
National Tax Tribunal Act 2005 and Cost Accountant?
13. Appearance before National Tax Tribunal.—(1) A party to an appeal other than Government
may either appear in person or authorise one or more chartered accountants or legal practitioners
or any person duly authorised by him or it to present his or its case before the National Tax
Tribunal.
) The Government may authorise one or more legal practitioners or any of its officers to present its case before the National Tax Tribunal.
may either appear in person or authorise one or more chartered accountants or legal practitioners
or any person duly authorised by him or it to present his or its case before the National Tax
Tribunal.
) The Government may authorise one or more legal practitioners or any of its officers to present its case before the National Tax Tribunal.
Thursday, October 12, 2006
Cost Audit -A paradigm view.
Re: Cost Audit Again in News-Business Line.
--- In CMA_India@yahoogroups.com, "CMA.R.Veeraraghavan"
>
>
Sir
This has reference to the Article in the opinion section of your daily on 12-10-2006 "Should we bid adieu to cost audit?".by A.R.Ramanathan.
In addition to what the esteemed author has stated- for the government and the industry to re-orient its outlook towards the exercise, I would like to add the following which may kindly be Published.
While questioning the requirement of Cost audit time and again one must analyse in totality why Cost audit is required and for that, one must know the deficiency and focus of related audit systems that have been statutorily sanctified ,specially the Financial Audit:
The focus of financial audit is scrutiny of financial records(Income and expenses)to ascertain and repose faith in the profits projected, Value of assets and liability in a given period, Propriety of the transaction of income and outgo. Simply this is the essence of scrutiny of financial records. Its focus is Shareholders of the company who are supposedly wealth creators of the business.
Financial records fail miserably in speaking out about the internal strength, efficiency, and sustenance aspect of the business ,which a seasoned businessman is interested. Financial records do not also reflect the wealth creation for the society at large(no macro economic outlook).
It doesn't question price-output-cost relation as well, it doesn't also address the competitors strategy and our strength. In essence it is simply a documentation of inflow-outflow data and projection of residue as gain available for distribution.
Financial audit is shortsighted in its approach and Blind towards societal interest.
The focus of Cost-audit is stake-holders at large (every citizen of India is a stakeholder in the economic activity of the country) Cost records basically reflect Cost incurred in the activity and the drivers that enable such incurrence and thus warn the business to moderate the drivers in advance. It speaks amply about utilisation of resources which is vital for managing an economy. It discloses the reasonability or otherwise of the pricing module which is important to bringing an exploitation free society.
Cost records scrutiny is vital for business sustenance as well ,when we talk of demutualisation of management and owners. Management perspective is sustenance and efficiency and these two are amply addressed by cost records, through its methods and techniques which are prescriptive(Like budgeting, standard costing ,variable costing, pricing methods like target pricing etc.)
Do owner-investor benefit from this exercise, yes in the long run an investor is unconcerned with immediate gains but the vision of business to sustain and its data projecting bottomline efficiency is utmost important for a owner-investor,
While a government benefit from the cost data for planning,resource monitoring,Price controls and comparative industry study with authentic cost data.The tax department benefits from the hard work of Cost accountants both inrespect of Direct tax(where the basis is to judge from allowances and disallowances and mapping with cost to business activity)and indirect taxes(where Cost of goods and services is vital).
It is thus unfortunate to see cost audit often being projected in negative perspective by one and all and in a democracy the conflict of interest in sharing such data is just in the maxim"what is good for all is many a times not good for a few who rule". which sans the basic framework of the constitution"Of the people, by the people and for the people".
Improving reporting methodology, switching from becoming just a prescriptive exercise to a value-added and dynamic tool can trigger focus on cost audit. Audit itself is an art of handling data to produce decision tools and cost auditor should now-on be proactive and prove value addition to the management. Cost audit in India is there to stay for long and i am confident about it and the world can learn from us in this regard.
Thanx
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