Page 139 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes 4. Has in employment adequate and competent persons who have the experience capacity
and ability to manage the business of a custodian;
5. Has prepared a complete manual, setting out the systems procedures to be followed by
him for the effective/efficient discharge of his functions and an arms' length relationship
to be maintained with his other business(es);
6. Is not a person who has been refused registration by the SEBI/whose registration has been
cancelled by the SEBI;
7. His director/principal officer/any of his employees is involved in litigation connected
with the securities market or has at any time been convicted of an offence involving moral
turpitude/economic offence;

8. The registration is in the interest of investor; and
9. The applicant is a fit and proper person. For determining whether an applicant/custodian
of securities is a fit and proper person, the SEBI would take into account the criteria
specified in the SEBI Intermediaries Regulation, 2008. The applicant should be a body
corporate. It has to pay registration fee of ` 15,00,000. The registration would require
renewal after every three years.

There are certain conditions for registration of a custodian. Also, it has to abide by the provisions
of the SEBI Act and Regulations in the discharge of its functions. Moreover, if any information
submitted to the SEBI is found to be false/misleading in any matter or if there is any change in
such information, the SEBI should be informed in writing. The SEBI may restrict the certificate of
registration to provide custodial services either in respect of securities or gold/gold-related
instruments of a client or title deeds of a real estate asset held by a real estate asset mutual fund.

General Obligations/Responsibilities

Included in the general obligations and responsibilities of custodians are: (1) code of conduct,
(2) segregation of activities, (3) monitoring/review/evaluation/inspection of systems/controls,
(4) separate custody account, (5) internal controls and (6) maintenance of records.

Code of Conduct

The custodians of securities should:
1. Maintain the highest standard of integrity, fairness and professionalism in the discharge
of his duties.
2. Be prompt in distributing dividends/interest/any such accruals of income received/
collected by him on behalf of his clients, on the securities held in custody.
3. Be continuously accountable for the movement of securities in/out of custody account,
deposit and withdrawal of cash from the clients accounts and provide complete audit trail
whenever called by the client/SEBI.
4. Establish and maintain adequate infrastructural facility to discharge custodial services to
the satisfaction of clients and the operating procedures/systems should be well-documented
and backed by operation manuals.
5. Maintain client confidentiality in respect of his affairs.
6. Take precautions to ensure that records are electronically maintained, continuity in record
keeping is not lost/destroyed, and sufficient backup of the records is available.
7. Create and maintain records of securities in such a manner that the tracing of securities/
obtaining duplicate documents is facilitated in the event of loss of original records for any
reason.

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