The Securities and Alternate Board of India (Sebi) has issued a session paper looking for suggestions on proposed updates to the Sebi (Custodian) Rules, which govern the operations of custodians within the Indian securities market.
Custodians play a vital function in guaranteeing the protection and correct administration of belongings for institutional buyers, reminiscent of international portfolio buyers (FPIs), mutual funds (MFs), different funding funds (AIFs), and portfolio managers. Their tasks embrace the safekeeping of securities, sustaining account information, amassing company motion advantages, and guaranteeing compliance with numerous rules. Additionally they act as intermediaries in settlement cycles, a job that has develop into much more important with the discount within the fairness settlement cycle from T+2 to T+1, and now, the push in the direction of non-compulsory T+0 settlement.
Given the significance of custodians in guaranteeing easy market operations, particularly for institutional buyers, the session paper proposes a number of modifications to boost regulatory oversight and operational resilience.
One of the vital important modifications proposed is a rise within the internet price requirement for custodians to ₹100 crore from ₹50 crore. Sebi reasoned {that a} larger internet price might present a cushion towards potential fraud losses and operational dangers. Custodians with larger internet price could also be higher outfitted to soak up losses, keep operational stability and improve the belief of their purchasers and stakeholders within the ecosystem, the paper noticed.
Sebi additionally proposed introducing a framework just like these for different market intermediaries like stockbrokers and depository participant to streamline the method of managing modifications in management inside custodians,
In recognition of the very important function custodians play within the securities market, Sebi has additionally proposed a framework for Enterprise Continuity Planning (BCP) and catastrophe restoration (DR) akin to these for certified stockbrokers.
The session paper prompt a clearer demarcation of custodial and different monetary providers actions inside custodians, proposing that sure associated providers be carried out by means of separate authorized entities to keep away from conflicts of curiosity. Moreover, whereas custodians are allowed to outsource actions, Sebi emphasised that these providers should adjust to current outsourcing pointers to make sure correct oversight.
Sebi has invited public feedback on the proposed modifications by 28 November.
