Sebi announces key measures on risk management and ease of doing business for custodians

SEBI

The Securities and Exchange Board of India (SEBI) approved key announcements around risk management and ease of doing business for custodians at its board meeting on December 18.

The measures are expected to simplify compliances and strengthen risk management and governance for custodians, according to a press release from the market regulator.

The release said that a dedicated net worth of Rs 75 crore shall be maintained by custodians, while the existing custodians shall achieve the same within three years.

The custodians shall adopt a framework on Business Continuity Plan and Disaster Recovery, orderly winding down and enhanced obligations, similar to that of Qualified Stock Brokers.

Then, custodians may undertake activities incidental to regulated activities as may be specified from time to time, provided there are effective controls in place to address potential conflicts of interest. They shall hive-off activities that are not under the purview of any financial sector regulator to a separate legal entity within two years.

For norms regarding outsourcing of non-core custodian activities, the Custodians and Depositories Standard Setting Forum (CDSSF) may make a list of core and non-core activities, in consultation with SEBI.

Then, the requirement of vaults shall apply only if the custodian is holding any physical securities. The specifications of such vault may be adopted by the industry through the CDSSF, in consultation with SEBI, with full disclosure and taking consent from the clients.

Also, certain reports submitted by custodians to SEBI shall be discontinued to remove duplicate reporting requirements to SEBI and depositories, the regulator added.