Forensic audit information to stock exchanges must: Sebi – Times of India

MUMBAI: Markets regulator Sebi on Tuesday made it mandatory for all listed entities to disclose to the stock exchanges any forensic audit that a company carries out. The entity is also required to intimate to the exchanges when a forensic audit is initiated, the regulator said after its board meeting earlier in the day.
To make debt funds less risky for investors, Sebi has decided that from now on debenture trustees should carry out an independent audit of the collateral against which the company is issuing the debentures. During the board meeting, Sebi also approved a proposal to facilitate setting up of a limited purpose repo-clearing corporation, which could help deepen the debt market.
Sebi further said that a person informing the regulator or a company about any violations relating to insider trading could do so within a period of three years from the date of violation. It also made changes in the rules so that the informant for insider trades should include specific information. These refer to details of securities, trades by the suspect and unpublished price-sensitive data based on which the insider trading is alleged, it said.

Relating to forensic audits, a Sebi release said this decision has been taken “to address the gaps in availability of information on forensic audit of listed entities”. At present, listed companies usually do not make forensic audits public, mainly for fears of negative impact on the stock price and the company’s brand. However, forensic audits initiated by regulatory or enforcement agencies have been excluded from this list.
Relating to debenture trustees, the company issuing the debentures should create a “recovery expense fund at the time of issuance of debt securities”, Sebi said. The trustees shall carry out continuous monitoring of the asset cover, including obtaining mandatory certificate from the statutory auditor on a half-yearly basis, it said.
The Sebi board decided to introduce a code of conduct for fund managers, including chief investment officers and dealers of fund houses. “The chief executive officer will be responsible to ensure that the code of conduct is followed by all such officers,” it said. The board also permitted fund houses to become self-clearing members of recognised clearing corporations to clear and settle trades in the debt segment of recognised stock exchanges, on behalf of its mutual fund schemes, it said.