Risk Management, Compliance and Grievance Redressal
Domain 5: Risk Management, Compliance and Grievance Redressal
This domain tests how an RTA/AMC controls operational risk, prevents fraud, maintains business continuity and resolves investor complaints within regulatory channels.
Core rules and concepts
- Segregation of duties and maker-checker controls are core: the person who enters a transaction should not be the sole approver. Reconciliation of units, bank receipts, dividend payments and redemption payouts detects breaks early.
- Operational-risk controls include access controls, audit trails, data backup, BCP/DR testing, vendor oversight and cyber-security incident reporting. NAV errors and processing errors must be escalated, corrected and, where required, compensated under AMC/trustee oversight.
- Complaints should first go to the AMC/RTA; unresolved complaints can be escalated to SEBI SCORES. RTAs must log, acknowledge, resolve and report complaints, and perform root-cause analysis to prevent recurrence.
- Compliance includes timely regulatory reporting, record retention, confidentiality and whistleblower/anti-fraud mechanisms.
Worked example
A dividend processing error pays some investors at the wrong rate. The RTA detects the break in reconciliation, freezes further payouts, escalates to the AMC, corrects affected folios and documents compensation. Root cause: a manual rate upload without maker-checker. The fix is dual approval and an automated rate check.
Traps
Do not rely on one person for processing and approval; do not hide or close complaints without evidence; do not treat BCP as a paper plan; do not ignore cyber incidents or NAV-error escalation.