Outsourcing
by Depositories
1. SEBI has vide circular CIR/MIRSD/24/2011 dated December
15,
2011 prescribed
Guidelines on Outsourcing of Activities by Intermediaries. These guidelines list out certain principles
for
outsourcing to be followed by all the intermediaries
registered with SEBI.
2. The Depository System Review Committee (DSRC) examined the outsourcing
practice followed
by the
Depositories on
various
parameters. Based on
recommendations by DSRC, the depositories are
advised to ensure the following: i. Depositories
shall
formulate
and
document
an outsourcing
policy
duly approved by their Board based on the guidelines given below and the principles outlined in the SEBI
circular
CIR/MIRSD/24/2011 dated
December
15, 2011.
Core activities of Depositories
ii. Core and critical activities of depositories shall not be outsourced. The core activities of the depositories shall include but not limited to the following:
a. Processing of the applications for admission of Depository Participants
(DPs), Issuers and Registrar & Transfer Agents (RTAs).
b. Facilitating Issuers/RTAs to
execute Corporate Actions.
c. Allotting ISINs for securities.
d. Maintenance and safekeeping of Beneficial Owner’s
data.
e. Execution of settlement and other incidental activities for pay-in/ pay- out of securities.
f. Execution of transfer of securities and other transactions like pledge, freeze, etc.
g. Provision of internet based facilities for access to demat accounts and
submitting delivery instructions.
h. Ensuring continuous connectivity to DPs, RTAs, Clearing Corporations
and
other Depository.
i.
Monitoring and redressal of investor
grievances.
j. Inspection of DPs and RTAs.
k. Surveillance Functions.
l.
Compliance Functions.
iii. Core
IT (Information
Technology)
support infrastructure
/
activities
for
running the core activities of depositories shall not be outsourced
to the
extent possible.
Due
Diligence
iv. The depositories shall
conduct appropriate due diligence in selecting the
third party
to whom activity
is proposed to be outsourced and ensure that
only
reputed entities having proven high delivery standards
are selected.
Risk
Management & Monitoring
v. Depositories shall ensure that outsourced activities are further outsourced
downstream only with the prior consent of the depository and with appropriate safeguards including proper
legal documentation/ agreement.
vi. Depositories shall ensure that risk impact analysis is undertaken before outsourcing any activity
and
appropriate risk mitigation measures like back up/ restoration system are in place.
vii. An effective monitoring of the entities selected for outsourcing shall be done to ensure that there is check on the activities of outsourced entity. Depositories shall strive to automate their processes and workflows to the extent possible which shall
enable real time monitoring of outsourced activities.
Audit
viii. The outsourcing policy document shall
act
as a reference for audit of the outsourced activities. Audit of implementation of risk
assessment and mitigation measures listed in the outsourcing
policy document and outsourcing agreement/ service level agreements pertaining to IT systems shall be part of System Audit of Depositories.
3. The Depositories
shall
implement
the provisions of
this circular within three months from
the
date of this
circular. The Depositories are advised
to:-
i. make amendments to the relevant Bye-Laws, Business Rules / Operating
Instructions for the implementation of the above decision, as
may be
applicable/necessary;
ii. disseminate the provisions of this
circular on their website.
4. This circular is being issued in exercise of powers conferred under Section 11(1)
of
the Securities and Exchange Board of India Act, 1992 read with Section 19 of
the Depositories Act, 1996
in the
interests of
investors in
securities
and
to promote the development of, and to regulate the securities market.
Company Secretary GAURAV SHARMA+919990694230 Connect on Watts App with Gaurav Email us [email protected] Official Blog Fema India Experts Connect with our Facebook Page:- Click and Like our Page Subcribe our Email updates like other 13,300 Members, Free/Easy/Comfortableway
