New Delhi: The ICAI has opposed Sebi's proposal to categorise chartered accountants as fiduciaries in the securities market, saying there is no specific statutory provision under the Sebi Act to take action against auditors of listed companies.
The chartered accountants' apex institute, which has more than 2.7 lakh members, has opposed the regulator's proposal to classify chartered accountants as fiduciaries along with other professionals.
In July, the regulator issued a consultative paper on the proposed Sebi (Fiduciaries in the Securities Market) (Amendment) Regulations for public consultations.
In the latest monthly message to the members, ICAI President Naveen N D Gupta said the proposed consultative paper "goes beyond the powers of Sebi".
"... there is no specific statutory provision under the Sebi Act conferring powers on Sebi to take action against auditors of listed companies," he said.
Further, the newsletter cited that the apex court of North Carolina, USA has decided that auditors/ accountants are not part of fiduciaries.
"Therefore, the consultative paper should not include the chartered accountants as fiduciaries," Gupta said.
Under the norms for fiduciaries proposed by Sebi, defaulters would face stringent penal actions, including ban from securities markets and disgorgement of fees.
Those found guilty of providing wrong audit or valuation reports would have to cough up any unlawful gains they might have made in the process, as per the proposals.
It also comes against the backdrop of the role of auditors and valuers coming under the regulatory scanner in a number of cases, involving financial misdoings.
Entities such as merchant bankers, rating agencies, custodians, debenture trustees and registrar to public issues are registered with Sebi. However, some other fiduciaries like practising chartered accountants and company secretaries, cost accountants, valuers and monitoring agencies are not registered with it.
To fill this gap, a high-level panel on corporate governance, headed by eminent banker Uday Kotak, had also suggested that the Securities and Exchange Board of India (Sebi) should have clear powers to act against auditors and other third-party fiduciaries with statutory duties in case of frauds as well as gross negligence.
Issuing the consultation paper, Sebi had said that said it is already empowered to issue directions to any person associated with the securities market (including fiduciaries), in the interest of investors or for its orderly development.
Since these fiduciaries are not specifically registered with the regulator or regulated by it under any regulation, there may be a need to clarify and specify the actions that may be taken by Sebi against such fiduciaries in case they submit false reports or certificates.
According to the proposed amendments to the regulations, a fiduciary who submits or issues any certificate or report should ensure that it is true in all material respects, while exercising due care, skill and diligence and ensuring proper care with respect to all processes involved in its issuance.
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