Presentation on Custodian and Custodial Services

8/2/2019 Presentation on Custodian and Custodial Services

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DARSHAN-964

VIREESH-985

Presentation on Custodian andcustodial services



INTRODUCTION

The custodians of securities who provide custodialservices play a critical role in the secondary market.

According to the SEBI regulations, custodialservices in relation to securities mean

(i) safe-keeping of the securities of a client who

enters into an agreement to avail of thesesecurities and (ii) providing services incidentalthereto, including:



Maintaining accounts of the securities of a client;

Collecting the benefits/rights accruing to him inrespect of securities;

Keeping him informed of the actions taken/ to betaken by the issuer of securities, having a bearing onthe benefits/ rights accruing to him;

Maintaining and reconciling records of the services

referred to above



Registration

Registration with SEBI is mandatory Application in prescribed form must be filed along

with application fee of Rs. 1,00,000

Requirements: Applicant must have net worth of Rs.50crores

Applicant must be a body corporate

Has to pay an annual fee of Rs.10 crores or

0.01%of the net worth



General obligations/ Responsibilities

Code of conduct:

Be prompt in distributing dividends / interest /any such accruals of income received / collected by

him on behalf of his clients, on the securities heldin custody.

Be continuously accountable for the movement of securities in/out of custody account, deposit and

withdrawal of cash from the clients accounts andprovide complete audit trail whenever called by theclient/SEBI



Maintain client confidentiality in respect of hisaffairs.

Take precautions to ensure that, where records areelectronically maintained, continuity in recordkeeping is not lost / destroyed, and sufficient back-up of the records is available.



Segregation of activities Monitoring/review/evaluation/inspection

of systems/ controls

Prohibition of assignment Separate custody account and agreement

with clients

Internal controls

Maintenance of records

Appointment of compliance officer

Information to SEBI



Inspection and audit

SEBI is empowered to conduct inspection /investigation, including inspection by an auditor of the

books, of accounts /records /documents /of custodians for any of the following purposes:

To ensure that they are being maintained in themanner specified in these regulations.

To investigate into complaints received from theinvestors/clients/any other person on any matter

having a bearing on his activities To ascertain compliance with the provisions of the

SEBI Act and these regulations.



Action by SEBI incase of default:

1. Suspension of Registration:

2. Cancellation of Registration:



Suspension of Registration:

Failure to furnish any information required by theSEBI/furnishing false/ misleading information inmaterial particular.

Non-submission of periodic returns / reports required by the SEBI.

Non-cooperation in any enquiry / inspection by theSEBI.

Failure to update its systems/ procedures asrecommended by the SEBI.

Failure to pay annual fees Guilty of misconduct / breach of code of conduct



Cancellation of Registration:

The SEBI can cancel the Registration of acustodian when

1. It is guilty of fraud or has been found convicted

of an offence involving moral turpitude, and2. It has been guilty of repeated default of the

nature, leading to suspension.



Uniform Norms and Practices

1. Function as an integral part of the system and integrate with the system. Therefore, no custodian should havesuch norms and practices as would result in theirfunctioning in isolation, away from the clearing andsettlement systems.

2. Become members of clearing houses/ clearingcorporations of the stock exchange(s) and participate inthe clearing and settlement process, through them, forall securities.

3. Comply with the applicable rules of stock exchanges where they have become members of the clearinghouse/ clearing corporation. This would facilitateoperations of clients, and also result in the reduction of cost of service for the clients.



Contd..

4. Advise all other clients about the facility to settletheir trades through the clearing house/ clearingcorporation, stressing on advantages such as

a) Time bound rectification of objections b) No shortages

c) Reduction of risk

d) Cost efficiency



Thank You

Presentation on Custodian and Custodial Services

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