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CUSTODIAN

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A custodian is a person who carries on the business of providing custodial services to the client. The custodian keeps the custody of the client. The custodian also provides incidental services such as maintaining the accounts of securities of the client, collecting the benefits or rights accruing to the client in respect of securities.  Every custodian should have adequate facilities, sufficient capital and financial strength to manage the custodial services. 

ROLES AND RESPONSIBILITIES:

(i) Administrate and protect the assets of the clients.

(ii) Open a separate custody account and deposit account in the name of each client.

(iii) Record assets.

(iv) Conduct registration of securities.

(v) Custodial services refer to the safeguarding of securities of a client. The activities relating to custodial services involve collecting the rights benefiting the client in respect of securities, maintaining the securities‟ account of the client, informing the clients about the actions taken or to be taken, and maintaining records of the services. 

CONSIDERATION OF APPLICATION FOR GRANT OF CERTIFICATE:

(i) the applicant fulfils the capital requirement; 

(ii) the applicant has the requisite approvals under any law, in connection with providing custodial services in respect of gold or gold related instrument of a mutual fund, or title deeds of real estate assets held by a real estate mutual fund scheme; 

(iii) the applicant has prepared a complete manual, setting out the systems and procedures to be followed by him for the effective and efficient discharge of his functions and arms length relationships to be maintained with other businesses, if any, of the applicant; 

CAPITAL REQUIREMENT: The applicant must have a Networth of minimum Rs. 50 Crores.  

CONDITIONS OF CERTIFICATE:

(a) it shall not commence any activities as custodian of securities unless it fulfills the capital requirement;

(b) it shall abide by provisions of act and these regulations in discharge of its functions as custodian of securities;

(c) it shall enter into a valid agreement with its clients for the purpose of providing custodial services;

(d) it shall pay annual fees as specified with SEBI;

(e) it any information previously submitted to SEBI is found to be false or misleading in any material particulars, or if there is any change in such information, it shall forthwith inform SEBI in writing;  and

(f) besides providing custodial services, it shall not carry on any activity other than activities relating to rendering of financial services. 

PROHIBITION OF ASSIGNMENT: No custodian of securities shall assign or delegate its functions as a custodian of securities to any other person unless such person is a custodian of securities. 

However, a custodian of securities may engage the services of a person not being a custodian, for the purpose of physical safekeeping of gold belonging to its client being a mutual fund having a gold exchange traded fund scheme, subject to the following conditions:

(a) the custodian shall remain responsible in all respects to its clients for safekeeping of gold kept with such other person, including any associated risks;

(b) all books, documents and other records relating to gold so kept with other person shall be maintained in the premises of custodian or if they are not so maintained they shall be made available therein, if so required by SEBI;

(c) the custodian of securities shall continue to fulfill all duties to clients relating to gold so kept with other person, except for its physical safekeeping. 

AGREEMENT WITH CLIENT: Every agreement shall provide for following matters, namely:

(i) the circumstances under which the custodian of securities will accept or release securities, assets or documents from the custody account.

(ii) the circumstances under which the custodian of securities will accept or release monies from the custody account.

(iii) the circumstances under which the custodian of securities will receive rights or entitlement on the securities of client.

(iv) the circumstances and manner of registration of securities in respect of each client;

(v) details of insurance, if any, to be provided for by the custodian of securities. 

INSPECTION AND AUDIT: SEBI may appoint one or more persons as inspecting officer to undertake inspection of books of accounts, records and documents of the custodian of securities for any of the following purposes, namely:

(a) to ensure that the books of account, records and documents are being maintained by the custodian of securities in the manner prescribed in these regulations;

(b) to investigate into complaints received from investors, clients or any other person, on any matter having a bearing on activities of custodian of securities.

(c) to ascertain whether the provisions of act and these regulations are being complied with by the custodian of securities; and

(d) to investigate suo moto into the affairs of custodian of securities, in the interest of securities market or in the interest of investors.

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