Introduction
For SEBI-registered funds—including Alternative Investment Funds (AIFs), Venture Capital funds, and portfolio managers—patch management and vulnerability control have moved from being IT hygiene tasks to fiduciary risk controls. SEBI inspections, auditor reviews, and trustee oversight increasingly treat unpatched systems and unmanaged vulnerabilities as clear indicators of weak governance and inadequate investor protection.
Modern investment funds rely heavily on digital platforms for investor onboarding, KYC, portfolio reporting, deal evaluation, document storage, and communication. These platforms, endpoints, cloud systems, SaaS tools, and third-party applications, are continuously exposed to known vulnerabilities. When such vulnerabilities remain unpatched, regulators view the resulting risk as foreseeable and preventable.
SEBI does not prescribe specific tools or technologies for patching and vulnerability management. Instead, it evaluates whether funds have structured processes, clear accountability, defined timelines, and evidence of execution. This article explains what SEBI-registered IT funds are expected to demonstrate, why patch and vulnerability control matter from a fiduciary standpoint, and how funds—especially lean ones—can meet expectations without excessive complexity.
Why Patch Management and Vulnerability Control Matter to SEBI
SEBI’s regulatory mandate focuses on investor protection, market integrity, and operational resilience. Unpatched systems directly undermine all three.
From a regulatory perspective:
- Most cyber incidents exploit known vulnerabilities, not unknown “zero-days”
- Vendors typically release patches well before exploits become widespread
- Failure to patch is therefore viewed as lack of due care, not bad luck
When inspections reveal outdated systems or missing patch evidence, SEBI increasingly treats this as a governance failure rather than a technical oversight.
Patch Management as a Fiduciary Responsibility
For SEBI-registered funds, fiduciary duty extends beyond financial decision-making. It includes safeguarding investor data, fund operations, and confidential information. Because vulnerabilities are publicly disclosed and patchable, not addressing them is considered a failure to mitigate foreseeable risk.
In practical terms, this means:
- Fund management must own patching accountability
- Delegating patching to vendors does not remove responsibility
- Trustees and auditors expect oversight and reporting
Patch management in cyber security is therefore not an IT task alone; it is a fiduciary control.
What SEBI Means by “Patch Management”
SEBI does not limit patch management to operating systems alone. Its inspection lens typically covers:
- Endpoint operating systems (Windows, macOS, Linux)
- Server operating systems
- Third-party applications (browsers, PDF readers, productivity tools)
- Cloud platforms and SaaS applications (where configurable)
- Network and security appliances
The expectation is not perfection, but reasonable, timely, and documented patching.
Understanding Vulnerability Control in the Fund Context
Vulnerability control goes beyond applying patches. It includes the ability to:
- Identify known vulnerabilities affecting fund systems
- Assess their potential impact
- Prioritise remediation based on risk
- Track closure and exceptions
For SEBI-registered funds, vulnerability control demonstrates whether management understands its technology risk exposure and acts on it systematically.
SEBI’s Practical Expectations During Inspections
While SEBI does not publish a single checklist, inspection patterns show consistent expectations. Funds are typically expected to demonstrate:
- A documented patch and vulnerability management policy
- Defined timelines for applying patches
- Clear ownership of patching decisions
- Visibility into patch status across systems
- Handling of exceptions and legacy systems
- Evidence of periodic review and reporting
Funds that cannot demonstrate these elements often receive adverse observations.
Governance and Ownership Expectations
One of the most common gaps observed during inspections is unclear ownership. SEBI expects funds to clearly define:
- Who is accountable for patch management (usually fund management)
- Who executes patching (internal staff or managed service provider)
- Who provides oversight (compliance, trustees, or sponsors)
Without defined ownership, even well-patched environments fail regulatory scrutiny due to governance weakness.
Risk-Based Patching: Proportionality Matters
SEBI recognises that not all systems carry equal risk. Funds are expected to adopt a risk-based approach rather than uniform patching schedules.
Typically:
- Internet-facing and user endpoints are prioritised
- Systems handling investor or deal data receive higher priority
- Critical vulnerabilities are patched faster than low-risk ones
Risk-based prioritisation demonstrates judgment, which regulators value.
Patch Timelines: What Is Considered Reasonable
SEBI does not mandate exact timelines, but inspections generally favour:
- Critical security patches applied promptly
- Regular patch cycles for non-critical updates
- Defined timelines documented in policy
The key is consistency between stated timelines and actual execution, supported by evidence.
Handling Legacy Systems and Patch Exceptions
Many funds operate legacy applications or systems that cannot be patched easily. SEBI does not prohibit such systems but expects:
- Documented justification for exceptions
- Compensating controls to reduce risk
- Periodic review of continued usage
Unmanaged exceptions are a frequent inspection red flag.
Third-Party and SaaS Patching Responsibilities
A common misconception among funds is that SaaS platforms and outsourced IT remove patching responsibility. SEBI’s view is more nuanced.
Funds are expected to:
- Understand shared responsibility models
- Ensure vendors patch their infrastructure
- Patch fund-controlled components (endpoints, configurations)
- Obtain assurance from vendors where applicable
Blind reliance on vendors without oversight is insufficient.
Vulnerability Identification and Tracking
SEBI inspections increasingly assess whether funds have visibility into vulnerabilities affecting their environment. This does not require complex tooling but does require:
- Awareness of publicly disclosed vulnerabilities
- Ability to identify impacted systems
- Tracking remediation status
Ad-hoc awareness is not sufficient; some form of structured tracking is expected.
Integration With Risk Registers and Governance Reporting
Patch and vulnerability risks should not exist in isolation. SEBI expects:
- Inclusion of patch-related risks in risk registers
- Reporting of patch compliance to management or trustees
- Escalation of significant delays or exposures
This integration reinforces the fiduciary nature of patch management.
Evidence: The Deciding Factor in Inspections
Even when patching is performed, many funds fail inspections due to lack of evidence. SEBI, auditors, and trustees typically look for:
- Patch policies
- Patch compliance reports
- Logs or screenshots showing patch status
- Exception and remediation records
Verbal assurances rarely satisfy regulatory reviews.
Common Patch Management Gaps Observed in SEBI Inspections
Across inspections, recurring issues include:
- No documented patch policy
- Inconsistent patching across endpoints
- Missing third-party application patches
- No evidence of execution
- Over-reliance on vendors without oversight
Most of these gaps stem from governance, not technology limitations.
Balancing Security and Operational Stability
Funds often fear that patching may disrupt critical operations. SEBI understands this concern but expects:
- Testing or phased deployment where feasible
- Defined rollback procedures
- Risk-based decision-making
Avoiding patching altogether due to fear of disruption is not considered reasonable.
Patch Management for Lean Funds
Lean funds are not expected to run enterprise-scale patch programs. However, they are expected to:
- Automate patching where possible
- Use managed services responsibly
- Maintain visibility and evidence
Simplicity combined with discipline is preferable to complexity without control.
Why Patch Management Is Often the First Inspection Focus Area
Patch management is often one of the first areas inspectors examine because:
- It is measurable
- It reflects basic cyber hygiene
- Failures are easy to identify
Strong patch management creates a positive first impression of governance maturity.
How Infodot Helps SEBI-Registered Funds Meet Patch and Vulnerability Expectations
Infodot Technology supports SEBI-registered funds in designing and operating inspection-ready patch management services frameworks. Infodot’s approach focuses on governance, automation, and evidence rather than tool proliferation.
Infodot helps funds by:
- Defining SEBI-aligned patch and vulnerability policies
- Implementing automated, risk-based patching
- Managing third-party application updates
- Tracking vulnerabilities and remediation
- Providing audit- and trustee-ready evidence and reporting
This enables fund management to demonstrate fiduciary diligence confidently during inspections.
Conclusion
For SEBI-registered funds, patch management and vulnerability control are no longer optional IT maintenance activities. They are foundational cybersecurity controls directly linked to fiduciary responsibility, investor protection, and regulatory confidence.
SEBI does not expect perfection or enterprise-scale programs. It expects awareness, accountability, proportionality, and evidence. Funds that approach patch management as a governance discipline—rather than a technical chore—are far better positioned to withstand inspections, audits, and investor scrutiny.
In an environment where most cyber incidents exploit known and patchable weaknesses, effective patch and vulnerability control is one of the simplest and most powerful ways for funds to reduce risk and demonstrate responsible management.
FAQs
- Does SEBI mandate patch management for funds?
SEBI expects reasonable patching practices as part of fiduciary responsibility and cybersecurity governance. - Are small AIFs also expected to patch systems?
Yes, expectations apply to all funds, scaled according to size and risk. - Is patching only about operating systems?
No, it includes applications, cloud components, and fund-controlled platforms. - Can patching be outsourced entirely?
Execution can be outsourced, but accountability remains with fund management. - Does SEBI prescribe patch timelines?
No, but expects defined, reasonable timelines aligned to risk. - Are unpatched systems considered a violation?
They are treated as unmanaged risk during inspections. - Is vulnerability scanning mandatory?
Not explicitly, but visibility into vulnerabilities is increasingly expected. - Do SaaS platforms remove patch responsibility?
No, funds must understand and oversee shared responsibilities. - Is documentation really required?
Yes, undocumented patching is treated as non-existent. - Can legacy systems remain unpatched?
Yes, but only with documented justification and compensating controls. - Are patch exceptions acceptable?
Yes, if tracked, approved, and periodically reviewed. - Do trustees review patch status?
They are expected to receive oversight-level reporting. - Is patch management part of risk registers?
Yes, significant patch risks should be formally documented. - Does patching affect operations?
It can, which is why testing and planning are important. - Are browsers and PDF readers in scope?
Yes, third-party applications are common attack vectors. - Does SEBI expect vulnerability remediation tracking?
Increasingly, yes, especially for critical vulnerabilities. - Is automation preferred for patching?
Yes, automation reduces errors and improves consistency. - Can patch reports satisfy auditors?
Yes, when aligned with policy and timelines. - Is patching a one-time activity?
No, it is an ongoing operational process. - Are endpoints the main focus?
Endpoints are a major focus due to user exposure. - Does patching reduce cyber incidents significantly?
Yes, most incidents exploit known, unpatched vulnerabilities. - Is patch management a technical or governance issue?
It is both, but SEBI evaluates it through a governance lens. - Do cloud workloads need patching?
Yes, fund-controlled components require oversight and updates. - Can lack of patching affect inspections?
Yes, it commonly leads to adverse observations. - Is evidence more important than intent?
Yes, evidence demonstrates due care and execution. - Are vulnerability alerts enough without action?
No, alerts must lead to remediation or documented acceptance. - Does Infodot manage patching for funds?
Yes, Infodot provides managed, SEBI-aligned patch services. - Is patching linked to fiduciary duty?
Yes, because risks are foreseeable and preventable. - Can patching be deferred indefinitely?
No, indefinite deferral without justification is unacceptable. - Do auditors check patch status?
Yes, patching is a common audit focus area. - Is reporting patch status to management necessary?
Yes, oversight requires visibility and reporting. - Are vulnerability databases relevant to funds?
Yes, they inform awareness of known risks. - Does patching help with investor confidence?
Yes, strong cyber hygiene reassures institutional investors. - Is patch management expensive for funds?
Not necessarily; automation and managed services reduce cost. - Why should funds prioritise patch management now?
Because regulatory scrutiny and cyber threats continue to increase.
