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CS Professional · IFSCA - Regulations, Listing and Compliances · Fund Management Services

While reviewing a managed fund, Ms. Nair, compliance officer of an FME in GIFT IFSC, finds that the fund breached an investment restriction in its placement memorandum. The head of investments asks her to rebalance quietly and keep it internal. What should she do?

She should report the breach to the board and senior management and escalate it to the Authority as required. A compliance officer must report non-compliances, and quietly rebalancing does not remove that duty. Waiting for an audit or informing only investors is inadequate.

  1. AAgree, since the breach was corrected and no investor lost money
  2. BWait for the annual audit to disclose it
  3. CReport the non-compliance to the board and senior management and escalate it to the Authority as requiredCorrect
  4. DReport it only to the fund's investors and not to the Authority

Explanation

A compliance officer's duty is to monitor compliance and report non-compliances, including to the Authority where the framework requires. Correcting the breach does not remove the reporting duty. Waiting for the audit or informing only investors falls short of that duty.

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