Preparing for the Annual Compliance Audit under IFSCA CMI Regulation 2025
Understanding the Annual Compliance Audit under IFSCA
The International Financial Services Centres Authority (IFSCA) introduced the Capital Market Intermediaries (CMI) Regulations, 2025 to strengthen regulatory governance of intermediaries operating in GIFT City — India’s only International Financial Services Centre (IFSC).
A core requirement under these regulations is the Annual Compliance Audit, applicable to brokers, custodians, investment advisers, and other registered intermediaries. This audit ensures that entities operate within the principles of investor protection, fair conduct, and sound risk management, as defined by IFSCA.
Why the CMI 2025 Regulations Matter for IFSC Entities
- Mandatory submission of Annual Compliance Audit Report by 30th September each year
- Expanded coverage including governance, AML/CFT, IT systems, grievance redressal, and fund segregation
- Stronger accountability for directors, compliance officers, and key personnel
- Alignment of IFSC practices with global regulatory benchmarks, enhancing investor trust and institutional participation
Scope of the Annual Compliance Audit
The audit framework is designed to be comprehensive, risk-based, and forward-looking, covering all critical operational and compliance aspects of intermediaries.
Key Areas of Review
- Registration & Net Worth: Validity of registration, stock exchange membership, and capital adequacy
- Governance & Compliance Officer: Independence of compliance function, board oversight, and conflict-of-interest policies
- Code of Conduct: Adherence to prescribed ethical standards and investor protection norms
- KYC / AML / CFT: Client due diligence, risk categorisation, and suspicious transaction reporting
- Segregation of Client Funds: Proper maintenance and reconciliation of client and proprietary accounts
- Risk Management: Frameworks for operational, market, and cyber risks
- Grievance Redressal: Timely complaint resolution and record-keeping
- Regulatory Filings: On-time submission of returns, statements, and audit reports to IFSCA
- Record-Keeping: Retention of books and records for at least eight years in accessible formats
Preparing for the Audit – Practical Steps
1. Conduct Internal Reviews
- Perform a self-assessment of compliance with IFSCA standards
- Identify documentation or procedural gaps early
- Reconcile client ledgers, accounts, and bank balances
2. Strengthen Compliance Oversight
- The Compliance Officer must ensure independent identification and reporting of non-compliances
- The Board and Management should demonstrate effective governance and oversight mechanisms
3. Documentation & Reporting Readiness
Maintain a comprehensive compliance file including:
- Registration certificates and financial statements
- KYC/AML documentation and client onboarding records
- Complaint logs and resolution documentation
- Risk and cyber security policies
- Final audit report submitted to IFSCA by 30th September
Common Issues Noted in Prior Audits
- Delay in filing audit reports or other IFSCA submissions
- Gaps in KYC/AML procedures and documentation
- Inadequate segregation of client and proprietary funds
- Weak board documentation or compliance officer reporting
- Delayed investor grievance responses
Identifying these issues early helps entities avoid regulatory observations and penalties.
Why Expert Advisory Support Matters
Complying with IFSCA’s Annual Audit obligations demands technical understanding, organized documentation, and regulatory foresight. A professional advisory firm ensures all three.
Experience of Nexpective Advisors
- Specialized IFSC focus: Deep experience across audit, compliance, and regulatory frameworks within GIFT City
- On-ground presence: Located in GIFT City, Gandhinagar — offering direct access and familiarity with IFSC operations
- Expert team: Chartered Accountants, Company Secretaries, and financial professionals with domain experience in IFSCA compliance
- Proven track record: Successfully supporting capital market intermediaries through annual audits and regulatory certifications
How Nexpective Advisors Helps You Stay Audit-Ready
- End-to-end compliance gap analysis and documentation review
- Preparation and verification of audit deliverables
- Independent compliance certification and filing support
- Advisory on governance strengthening and risk frameworks
Conclusion
The Annual Compliance Audit under IFSCA CMI Regulation 2025 is not merely a procedural formality — it’s an essential tool for credibility and investor trust in GIFT City.
With regulatory expectations evolving rapidly, proactive compliance has become a business necessity. Partnering with Nexpective Advisors ensures audit readiness, seamless documentation, and a confident compliance posture before the regulator.
Contact Nexpective Advisors today for a readiness review and ensure your entity meets all compliance benchmarks under IFSCA’s CMI Regulations, 2025.
