Custodian_Apr17

Custodian_Apr17_2020
26 Liability for action in case of default. and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002
1 (1) These regulations may be called the 2[Securities and Exchange Board of India (Custodian) Regulations, 1996].
1 (2) They shall come into force on the date of their publication in the Official Gazette.
2 In these regulations unless the context otherwise requires:—(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of1992);(b) "certificate" means a certificate of registration granted by the Board under theseregulations;(c) " client " means any person who has entered into an agreement with a 3[custodian]to avail of custodial services provided by the 4[custodian];(d) "5[custodian]" means any person who carries on or proposes to carry on thebusiness of providing custodial services;6[(e)"custodial services" in relation to securities 7[or goods] of a client or gold orgold related instruments held by a mutual fund or title deeds of real estate assets heldby a real estate mutual fund scheme in accordance with the Securities and ExchangeSecurities and Exchange Board of India (Custodian of Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.3 Substituted ibid for the words “custodian of securities ”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.6Substituted by the SEBI (Custodian of Securities) (Amendment) Regulations, 2008, w.e.f. 4-7- 2008. Prior tosubstitution, clause (e), as amended by SEBI (Custodian of Securities) (Amendment) Regulations, 2006, w.e.f. 12-1-2006, read as under:"(e) "custodial services" in relation to securities of a client or gold or gold related instruments held by a mutual fundor title deeds of real estate assets held by a real estate mutual fund in accordance with the Securities and ExchangeBoard of India (Mutual Funds) Regulations, 1996 means, safe keeping of such securities or gold or gold relatedinstruments and providing services incidental thereto, and includes—(i) maintaining accounts of securities or gold or gold related instruments of a client ;(ii) collecting the benefits or rights accruing to the client in respect of securities or gold or gold related instruments;(iii) keeping the client informed of the actions taken or to be taken by the issuer of securities , having a bearing on thebenefits or rights accruing to the client ; and(iv) maintaining and reconciling records of the services referred to in sub-clause (i) to (iii);Prior to this amendment, clause (e) read as under:(e) "custodial services" in relation to securities means, safe keeping of securities of a client and providing servicesincidental thereto, and includes—(i) maintaining accounts of securities of a client ;(ii) collecting the benefits or rights accruing to the client in respect of securities ;(iii) keeping the client informed of the actions taken or to be taken by the issuer of securities , having a bearing on thebenefits or rights accruing to the client ; and (v) maintaining and reconciling records of the services referred to in sub-clause (i) to (iii);"w.e.f. 1-1-2019.Board of India (Mutual Funds) Regulations, 1996 means, 8[the] safekeeping of such securities 9[or goods] or gold or gold related instruments or title deeds of real estateassets and providing services incidental thereto, and includes—(i) maintaining accounts of securities 10[or goods] or gold or gold related instrumentsor title deeds of real estate assets of a client ;11[(ia) undertaking activities as a Domestic Depository in terms of the Companies(Issue of Indian Depository Receipts) Rules, 2004;](ii) collecting the benefits or rights accruing to the client in respect of securities 12[orgoods] or gold or gold related instruments or title deeds of real estate assets;(iii) keeping the client informed of the actions taken or to be taken by the issuer of securities , having a bearing on the benefits or rights accruing to the client ;13[(iiia) keeping the client informed of the actions taken or to be taken with respectto the goods held on its behalf;] and(iv) maintaining and reconciling records of the services referred to in subclauses (i)to 14[(iiia)];](f) "custody account" means an account of a client maintained by a 15[custodian] inrespect of securities ;(g) 16[* * *](h) "Form" means any of the forms set out in the First Schedule;17[(ha) ‘goods’ means the goods notified by the Central Government under clause(bc) of section 2 of the Securities contracts (Regulation) Act, 1956 and forming theunderlying of any commodity derivative contract;](i) " inspecting officer " means an inspecting officer appointed by the Board underregulation 21;(j) "Schedule" means a Schedule annexed to these regulations;18[(k) " securities " shall have the meaning assigned to it in clause (h) of section 2 ofthe Securities Contracts (Regulation) Act, 1956.]8 Inserted ibid.w.e.f. 1-1-2019.10 Inserted ibid.effect from 19-6-2009.w.e.f. 1-1-2019.13 Inserted ibid.Regulations, 2018, w.e.f. 1-1-2019.15 Substituted ibid for the words “custodian of securities ”.w.e.f. 27-9-2002. Prior to its omission, clause (g) read as under,
3 (1) Any person proposing to carry on business as 19[custodian] on or after the commencement of these regulations shall make an application to the Board for grant of a certificate.
3 (2) Any person who is carrying on business as a 20[custodian ] on the date of commencement of these regulations shall make an application to the Board for grant of certificate within a period of three months from the date of such commencement: Provided that the Board may, in special cases, where it is of the opinion that it is necessary to do so for reasons to be recorded in writing may extend the period up to a maximum of six months from the date of such commencement.
3 (3) An application for grant of a certificate under sub-regulation (1) or sub regulation(2) shall be made in Form A and shall be accompanied by an application fee asspecified in Part A of the Second Schedule and be paid in the manner specified inPart B thereof.
3 (4) Any person referred to in sub-regulation (2) who fails to make an application for grant of certificate within the period or the extended period specified therein, shall cease to carry on any activity as 21[custodian] and shall be subject to the directions of the Board with regard to the transfer of records, documents or securities relating
4 An application under regulation 3 which is not complete in all respects or which does not conform to the instructions specified therein shall be rejected : Provided that, before rejecting any such application, the Board shall give the applicant an opportunity to remove the objection, within such time as may be specified by the Board.
5 (1) The Board may require the applicant to furnish such further information or clarification regarding matters relevant to the activities of a 23[custodian] for the purpose of consideration of the application.
5 (2) The applicant or his authorised representative shall, if so required, appear before the Board for personal representation, in connection with the grant of certificate. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 20 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 22 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.
6 (1) For the purpose of the grant of a certificate the Board shall take into account all matters which are relevant to the activities of a 24[custodian] and in particular, whether:—(a) the applicant fulfils the capital requirement in accordance with regulation 7; (b)the applicant has the necessary infrastructure, including adequate office space, vaultsfor safe custody of securities and computer systems capability, required toeffectively discharge his activities as 25[custodian];26[(ba) the applicant has the requisite approvals under any law for the time being inforce, in connection with providing custodial services in respect of 27[goods of aclient or] gold or gold related instruments of a mutual fund 28[or title deeds of a realestate assets held by a real estate mutual funds scheme] ,where applicable];(c) the applicant has in his employment adequate and competent persons who havethe experience, capacity and ability of managing the business of the 29[custodian];(d) the applicant has prepared a complete manual, setting out the systems andprocedures to be followed by him for the effective and efficient discharge of hisfunctions and the arms length relationships to be maintained with the otherbusinesses, if any, of the applicant ;(e) the applicant is a person who has been refused a certificate by the Board or whosecertificate has been cancelled by the Board ;(f) the applicant , his director, his principal officer or any of his employees is involvedin any litigation connected with the securities market;(g) the applicant , his director, his principal officer or any of his employees has at anytime been convicted of any offence involving moral turpitude or of any economicoffence;30[(gg)the applicant is a fit and proper person;] and(h) the grant of certificate is in the interest of investors .
6A For the purpose of determining whether an applicant or the 32[custodian] is a fit and proper person the Board may take into account the criteria specified in Schedule
2008 ]
7 (1) The capital requirement referred to in clause (a) of sub-regulation (1) of regulation 6 shall be a net worth of a minimum of rupees fifty crores. means the paid-up capital and the free reserves as on the date of the application.
7 (2) Notwithstanding anything contained in sub-regulation (1) any 33[custodian] which(a) has been approved by the Board under the provisions of Securities and ExchangeBoard of India (Mutual Fund) Regulations, 1993, or the Securities and ExchangeBoard of India (Foreign Institutional Investors) Regulations, 1995, or theGovernment of India Guidelines for Foreign Institutional Investors dated September14, 1992, even if it does not have the net worth specified in sub-regulation (1) maycontinue to function as a 34[custodian] and shall within a period of one year from thedate of commencement of these regulations raise its net worth to that specified insub-regulation (1):35[Provided that the period specified above may be extended by the Board upto amaximum of 5 years;](b) has made an application under regulation 3 shall be permitted to fulfil his capitaladequacy requirements within one month of the receipt of certificate underregulation 8.
8 (1) After considering the application under regulation 3, with reference to the matters specified in regulation 6, if the Board on being satisfied that all particulars sought have been furnished and the applicant is eligible for the grant of a certificate, shall send an intimation of the same to the applicant .
8 (2) On receipt of an intimation from the Board under sub-regulation (1), the applicant shall pay to the Board a registration fee specified in Part A of Second Schedule in the manner specified in Part B thereof.
2004 ─The provisions of the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 shall, as far as may be, apply to all applicant s or the custodians of securities under these regulations." Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 33 Substituted ibid for the words “custodian of securities. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.(3) The Board shall thereafter grant a certificate in Form B to the applicant on receiptof the registration fee:36[Provided that the Board may restrict the certificate of registration to providingcustodial services either in respect of securities or 37[goods of a client or] in respectof gold or gold related instruments of a 38[mutual fund] 39[or title deeds of real estateassets held by a real estate mutual funds scheme].]40[(4) A 41[custodian] holding a certificate of registration as on the date ofcommencement of the Securities and Exchange Board of India (Custodian ofSecurities) (Amendment) Regulations, 2006, may provide custodial services inrespect of gold or gold related instruments of a mutual fund only after taking priorapproval of the Board.]42[(5) A 43[custodian] holding a certificate of registration as on the date ofcommencement of the Securities and Exchange Board of India (Custodian ofSecurities) (Amendment) Regulations, 2008 may provide custodial services inrespect of title deeds of real estate assets held by a real estate mutual fund scheme.]44[(6) A custodian holding a certificate of registration as on the date ofcommencement of the Securities and Exchange Board of India (Custodian ofSecurities) (Amendment) Regulations, 2018, may provide custodial services inrespect of goods only after taking prior approval of the Board.]
9 The certificate granted to 45[custodian] shall be subject to the following conditions, namely :─(a) it shall not commence any activities as 46[custodian] unless it fulfils the capitalrequirement specified in regulation 7;(b) it shall abide by the provisions of the Act and these regulations in the dischargeof its functions as 47[custodian];w.e.f. 1-1-2019.(Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.w.e.f. 1-1-2019.45 Substituted ibid for the words “custodian of securities”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.47 Substituted ibid for the words “custodian of securities”.(c) it shall enter into a valid agreement with its client for the purpose of providingcustodial services;(d) it shall pay annual fees as specified in Part A of the Second Schedule in themanner specified in Part B thereof;(e) if any information previously submitted by it to the Board is found by it to befalse or misleading in any material particular, or if there is any change in suchinformation, it shall forthwith inform the Board in writing; and
9A (1) Every certificate granted under sub-regulation (3) of regulation 8 on and after the commencement of the Securities and Exchange Board of India (Custodian of Securities) (Second Amendment) Regulations, 2006, shall be valid for a period of three years from the date of grant of registration or its renewal.
9A (2) Every certificate granted under sub-regulation (3) of regulation 8 before the commencement of the Securities and Exchange Board of India (Custodian of Securities) (Second Amendment) Regulations, 2006, shall be valid for a period
10 (1) After considering an application for grant of certificate made under regulation 3, if the Board is satisfied that a certificate should not be granted, the Board may reject the application after giving the applicant a reasonable opportunity of beingheard.
10 (2) The decision of the Board to reject the application shall be communicated within thirty days of such decision to the applicant in writing stating therein the grounds on which the application has been rejected .
10 (3) An applicant , who is aggrieved by the decision of the Board under subregulation(1) may, within a period of thirty days from the date of receipt of communicationunder sub-regulation (2), apply to the Board for re-consideration of its decision.3-2019. Prior to substitution the regulation read as below:
2019 Prior to omission the regulation read as below:
9B (1) A custodian, desirous of having its certificate renewed shall make an application to the Board for renewal of the certificate in Form A, not less than three months before the expiry of its period of validity under regulation 9A.
9B (2) The application for renewal of certificate shall be dealt with, as far as may be, as if it were an application for the grant of a fresh certificate under regulation 3 and shall be accompanied with the application fee as specified in Schedule II.”(4) The Board shall, as soon as possible, in the light of the submissions made in theapplication for reconsideration made under sub-regulation (3) and wherevernecessary, after giving the applicant a reasonable opportunity of being heard, conveyits decision in writing to the applicant .
11 Any 51[custodian] whose application for grant of certificate has been rejected by the Board shall, on and from the date of the receipt of the communication under sub- regulation (2) of regulation 10 cease to carry on any activity as 52[custodian] and shall be subject to the directions of the Board with regard to the transfer of records documents or securities that may be in its custody or control relating to its activity as 53[custodian].
12 Every 54[custodian] shall abide by the Code of Conduct as set out in the Third Schedule.
13 Where a 55[custodian] is carrying on any activity besides that of acting as 56[custodian], then,—(i) the activities relating to his business as 57[custodian] shall be separate andsegregated from all other activities;(ii) its officers and employees engaged in providing custodial services shall not beengaged in any other activity carried on by him.
14 (1) Every 58[custodian] shall have adequate mechanisms for the purposes of reviewing, monitoring and evaluating the custodian's controls, systems, procedures and safeguards. 51 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 54 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 56 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 58 Substituted ibid for the words “custodian of securities”.
14 (2) The 59[custodian] shall cause to be inspected annually the mechanism referred to in sub-regulation (1) by an expert and forward the inspection report to the Board within three months from the date of inspection.
15 No 60[custodian] shall assign or delegate its functions as a 61[custodian] to any other person unless such person is a 62[custodian]: 63[Provided that a 64[custodian] may engage the services of a person not being a custodian, for the purpose of physical safekeeping of 65[goods or] gold belonging to its client 66[including] a mutual fund having a gold exchange traded fund scheme, subject to the following conditions—(a) the 67[custodian] shall remain responsible in all respects to its client forsafekeeping of the 68[goods or] gold kept with such other person, including anyassociated risks;(b) all books, documents and other records relating to the 69[goods or] gold so keptwith the other person shall be maintained in the premises of the custodian or if theyare not so maintained, they shall be made available therein, if so required by theBoard;(c) the 70[custodian] shall continue to fulfill all duties to the clients relating to thegold 71[goods or] so kept with the other person, except for its physical safekeeping.]Separate custody account.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.61 Substituted ibid for the words “custodian of securities”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.w.e.f. 1-1-2019.66 Substituted ibid for the word “being”Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.w.e.f. 1-1-2019.69 Inserted ibid.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.
16 Every 72[custodian] shall open a separate custody account for each client , in the name of the client whose securities are in its custody and the assets of one client shall not be mixed with those of another client .
17 Every 73[custodian] shall enter into an agreement with each client on whose behalf it is acting as 74[custodian] and every such agreement shall provide for the following matters namely:─(a) the circumstances under which the 75[custodian] will accept or release securities76[, goods]77[, assets or documents] from the custody account;(b) the circumstances under which the 78[custodian] will accept or release moniesfrom the custody account;(c) the circumstances under which the 79[custodian] will receive rights orentitlements on the securities 80[or goods] of the client;(d) the circumstances and the manner of registration of securities in respect of eachclient; and(e) details of the insurance, if any, to be provided for by the 81[custodian].
18 (1) Every 82[custodian] shall have adequate internal controls to prevent any manipulation of records and documents including audits for securities 83[, goods] and rights or entitlements arising from the securities 84[and goods] held by it on behalf of its client. 72 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 74 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 76 Inserted ibid. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 79 Substituted ibid for the words “custodian of securities”.w.e.f. 1-1-2019.81 Substituted ibid for the words “custodian of securities”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.83 Inserted ibid.w.e.f. 1-1-2019.
18 (2) Every 85[custodian] shall have appropriate safekeeping measures to ensure that
19 (1) Without prejudice to the provisions of any other law for the time being in force every 88[custodian] shall maintain the following records and documents, namely:─(a) records containing details of securities 89[, goods] 90[, assets or documents]received and released on behalf of each client;(b) records containing details of monies received and released on behalf of eachclient;(c) records containing details of rights or entitlements of each client arising from thesecurities held on behalf of the client;(d) records containing details of registration of securities in respect of each client;(e) ledger for each client;(f) records containing details of instructions received from and sent to clients; and(g) records of all reports submitted to the Board.
19 (2) Every 91[custodian] shall intimate to the Board the place where the records and documents under sub-regulation (1) are maintained.
19 (3) Every 92[custodian] shall preserve the records and documents maintained under
19A (1) Every 94[custodian] shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government and for redressal of investors' grievances.
19A (2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him.] Information to the Board . 85 Substituted ibid for the words “custodian of securities”. 86 Inserted ibid. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 89 Inserted ibid. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 92 Substituted ibid for the words “custodian of securities”.
20 (1) The Board may, at any time, call for any information from a 95[custodian] with respect to any matter relating to its activity as 96[custodian].
20 (2) Where any information is called for by the Board under sub-regulation (1), it shall be the duly of the 97[custodian] to furnish such information within such
21 (1) The Board may appoint one or more persons as inspecting officer to undertake inspection of the hooks of account, records and documents of the 98[custodian] for any of the following purposes, namely:─(a) to ensure that the books of account, records and documents are being maintainedby the 99[custodian] in the manner specified in these regulations;(b) to investigate into complaints received from investors , clients or any otherperson, on any matter having a bearing on the activities of the 100[custodian];(c) to ascertain whether the provisions of the Act and these regulations are beingcomplied with by the 101[custodian]; and(d) to investigate suo motu into the affairs of the 102[custodian] in the interest of thesecurities market or in the interest of investors .
22 (1) Before ordering an inspection under regulation 21 the Board shall give not less than ten days notice to the 103[custodian].
22 (2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given , it may by an order in writing direct that the inspection of the affairs of the 104[custodian] be taken up without such notice. 95 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 98 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 101 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 103 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.
22 (3) During the course of an inspection, the 105[custodian] against whom the inspection is being carried out shall be bound to discharge his obligations as provided in regulation 23.
23 (1) It shall be the duty of the 106[custodian] whose affairs are being inspected, and of every director, officer and employee thereof to produce to the inspecting officer such books, securities, accounts, records and other documents in its custody or control and furnish him with such statements and information relating to his activities of the 107[custodian], as the inspecting officer may require, within such reasonable period as the inspecting officer may specify.
23 (2) The 108[custodian] shall allow the inspecting officer to have reasonable access to the premises occupied by such custodian or by any other person on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the 109[custodian] or such other person and also provide copies of documents or other materials which in the opinion of the inspecting officer are relevant for the purposes of the inspection.
23 (3) The inspecting officer , in the course of inspection, shall be entitled to examine or to record the statements of any director , officer or employee of the 110[custodian].
23 (4) It shall be the duty of every director, officer or employee of the 111[custodian] to give to the inspecting officer all assistance in connection with the inspection, which the inspecting officer may reasonably require.
24 The inspecting officer shall, as soon as possible, on completion of the inspection submit an inspection report to the Board : Provided that if directed to do so by the Board , he may submit an interim report. 112[Action on inspection or investigation report. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 106 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 108 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 110 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 2002, w.e.f. 27-9-2002. Prior to its substitution, regulation 25 read as under: “25. (1) Communication of findings etc. to the custodian of securities of securities.─The Board shall, after consideration of the inspection report or the interim report referred to in regulation 24, communicate the findings of
25 The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under 113[Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008].]
25A The Board shall have the power to appoint an auditor to inspect or investigate, as the case may be, into the books of account, records, documents or affairs of the applicant or the custodian, as the case may be; Provided that the auditor s so appointed shall have the same powers as vested in the inspecting officer under regulation 21 and the applicant or custodian and its directors, officers and employees shall be under the same obligations, towards the auditor so appointed, as are mentioned in regulation 23.
25B The Board shall be entitled to recover from the custodian or the applicant , as the case may be, such expenses including fees paid to the auditors as may be incurred by it for the purposes of inspecting the books of account, records and documents of
26 A 116[custodian] who—(2) On receipt of the reply if any, from the custodian of securities, the Board may call upon the custodian of securitiesto take such measures as the Board may deem fit in the interest of the securities market and for due compliance withthe provisions of the Act, the rules framed thereunder and these regulations.Officer and Imposing Penalty) Regulations, 2002" by the SEBI (Intermediaries) Regulations, 2008 w.e.f. 26-5-2008.2002, w.e.f. 27-9-2002. Prior to its substitution, regulation 26 read as under:“26. Suspension of certificate. The Board may suspend the certificate granted to a custodian of securities where thecustodian of securities:(a) contravenes any of the provisions of the Act, the rules framed thereunder or these regulations;(b) fails to furnish any information relating to his activity as custodian of securities as required by the Board ;(c) furnishes to the Board information which is false and misleading in any material particular;(d) does not submit periodic returns or reports as required by the Board ;(e) does not co-operate in any enquiry or inspection conducted by the Board ;(f) fails to update its systems and procedures as recommended by the Board ;(g) fails to resolve the complaints of clients or fails to give a satisfactory reply to the Board in this behalf;(h) is guilty of misconduct or makes a breach of the Code of Conduct specified in the Third Schedule;(i) fails to pay annual fees,shall be dealt with in the manner provided under the Securities and Exchange Board of India (Procedure for HoldingEnquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002."Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.(a) contravenes any of the provisions of the Act, the rules framed thereunderor these regulations;(b) fails to furnish any information relating to his activity as 117[custodian] asrequired by the Board ;(c) furnishes to the Board information which is false and misleading in anymaterial particular;(d) does not submit periodic returns or reports as required by the Board ;(e) does not co-operate in any enquiry or inspection conducted by the Board ;(f) fails to update its systems and procedures as recommended by the Board ;(g) fails to resolve the complaints of clients or fails to give a satisfactory replyto the Board in this behalf;(h) is guilty of misconduct or makes a breach of the Code of Conduct specifiedin the Third Schedule;(i) fails to pay annual fees,shall be dealt with in the manner provided under 118[Chapter V of the Securities andExchange Board of India (Intermediaries) Regulations, 2008].]
33 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .
33 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. a live testing environment where new products, processes, services, business models,etc. may be deployed on a limited set of eligible customers for a specified period of117 Substituted ibid for the words “custodian of securities”.Imposing Penalty) Regulations, 2002" by the SEBI (Intermediaries) Regulations, 2008, w.e.f. 26-5-2008.Regulations, 2002, w.e.f. 27-9-2002.time, for furthering innovation in the securities market , subject to such conditions as

Custodian_Apr17_2020

26 Liability for action in case of default. and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002 and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002

1 (1) These regulations may be called the 2[Securities and Exchange Board of India (Custodian) Regulations, 1996].

1 (2) They shall come into force on the date of their publication in the Official Gazette.

2 In these regulations unless the context otherwise requires:—(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of1992);(b) "certificate" means a certificate of registration granted by the Board under theseregulations;(c) " client " means any person who has entered into an agreement with a 3[custodian]to avail of custodial services provided by the 4[custodian];(d) "5[custodian]" means any person who carries on or proposes to carry on thebusiness of providing custodial services;6[(e)"custodial services" in relation to securities 7[or goods] of a client or gold orgold related instruments held by a mutual fund or title deeds of real estate assets heldby a real estate mutual fund scheme in accordance with the Securities and ExchangeSecurities and Exchange Board of India (Custodian of Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.3 Substituted ibid for the words “custodian of securities ”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.6Substituted by the SEBI (Custodian of Securities) (Amendment) Regulations, 2008, w.e.f. 4-7- 2008. Prior tosubstitution, clause (e), as amended by SEBI (Custodian of Securities) (Amendment) Regulations, 2006, w.e.f. 12-1-2006, read as under:"(e) "custodial services" in relation to securities of a client or gold or gold related instruments held by a mutual fundor title deeds of real estate assets held by a real estate mutual fund in accordance with the Securities and ExchangeBoard of India (Mutual Funds) Regulations, 1996 means, safe keeping of such securities or gold or gold relatedinstruments and providing services incidental thereto, and includes—(i) maintaining accounts of securities or gold or gold related instruments of a client ;(ii) collecting the benefits or rights accruing to the client in respect of securities or gold or gold related instruments;(iii) keeping the client informed of the actions taken or to be taken by the issuer of securities , having a bearing on thebenefits or rights accruing to the client ; and(iv) maintaining and reconciling records of the services referred to in sub-clause (i) to (iii);Prior to this amendment, clause (e) read as under:(e) "custodial services" in relation to securities means, safe keeping of securities of a client and providing servicesincidental thereto, and includes—(i) maintaining accounts of securities of a client ;(ii) collecting the benefits or rights accruing to the client in respect of securities ;(iii) keeping the client informed of the actions taken or to be taken by the issuer of securities , having a bearing on thebenefits or rights accruing to the client ; and (v) maintaining and reconciling records of the services referred to in sub-clause (i) to (iii);"w.e.f. 1-1-2019.Board of India (Mutual Funds) Regulations, 1996 means, 8[the] safekeeping of such securities 9[or goods] or gold or gold related instruments or title deeds of real estateassets and providing services incidental thereto, and includes—(i) maintaining accounts of securities 10[or goods] or gold or gold related instrumentsor title deeds of real estate assets of a client ;11[(ia) undertaking activities as a Domestic Depository in terms of the Companies(Issue of Indian Depository Receipts) Rules, 2004;](ii) collecting the benefits or rights accruing to the client in respect of securities 12[orgoods] or gold or gold related instruments or title deeds of real estate assets;(iii) keeping the client informed of the actions taken or to be taken by the issuer of securities , having a bearing on the benefits or rights accruing to the client ;13[(iiia) keeping the client informed of the actions taken or to be taken with respectto the goods held on its behalf;] and(iv) maintaining and reconciling records of the services referred to in subclauses (i)to 14[(iiia)];](f) "custody account" means an account of a client maintained by a 15[custodian] inrespect of securities ;(g) 16[* * *](h) "Form" means any of the forms set out in the First Schedule;17[(ha) ‘goods’ means the goods notified by the Central Government under clause(bc) of section 2 of the Securities contracts (Regulation) Act, 1956 and forming theunderlying of any commodity derivative contract;](i) " inspecting officer " means an inspecting officer appointed by the Board underregulation 21;(j) "Schedule" means a Schedule annexed to these regulations;18[(k) " securities " shall have the meaning assigned to it in clause (h) of section 2 ofthe Securities Contracts (Regulation) Act, 1956.]8 Inserted ibid.w.e.f. 1-1-2019.10 Inserted ibid.effect from 19-6-2009.w.e.f. 1-1-2019.13 Inserted ibid.Regulations, 2018, w.e.f. 1-1-2019.15 Substituted ibid for the words “custodian of securities ”.w.e.f. 27-9-2002. Prior to its omission, clause (g) read as under,

3 (1) Any person proposing to carry on business as 19[custodian] on or after the commencement of these regulations shall make an application to the Board for grant of a certificate.

3 (2) Any person who is carrying on business as a 20[custodian ] on the date of commencement of these regulations shall make an application to the Board for grant of certificate within a period of three months from the date of such commencement: Provided that the Board may, in special cases, where it is of the opinion that it is necessary to do so for reasons to be recorded in writing may extend the period up to a maximum of six months from the date of such commencement.

3 (3) An application for grant of a certificate under sub-regulation (1) or sub regulation(2) shall be made in Form A and shall be accompanied by an application fee asspecified in Part A of the Second Schedule and be paid in the manner specified inPart B thereof.

3 (4) Any person referred to in sub-regulation (2) who fails to make an application for grant of certificate within the period or the extended period specified therein, shall cease to carry on any activity as 21[custodian] and shall be subject to the directions of the Board with regard to the transfer of records, documents or securities relating

4 An application under regulation 3 which is not complete in all respects or which does not conform to the instructions specified therein shall be rejected : Provided that, before rejecting any such application, the Board shall give the applicant an opportunity to remove the objection, within such time as may be specified by the Board.

5 (1) The Board may require the applicant to furnish such further information or clarification regarding matters relevant to the activities of a 23[custodian] for the purpose of consideration of the application.

5 (2) The applicant or his authorised representative shall, if so required, appear before the Board for personal representation, in connection with the grant of certificate. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 20 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 22 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.

6 (1) For the purpose of the grant of a certificate the Board shall take into account all matters which are relevant to the activities of a 24[custodian] and in particular, whether:—(a) the applicant fulfils the capital requirement in accordance with regulation 7; (b)the applicant has the necessary infrastructure, including adequate office space, vaultsfor safe custody of securities and computer systems capability, required toeffectively discharge his activities as 25[custodian];26[(ba) the applicant has the requisite approvals under any law for the time being inforce, in connection with providing custodial services in respect of 27[goods of aclient or] gold or gold related instruments of a mutual fund 28[or title deeds of a realestate assets held by a real estate mutual funds scheme] ,where applicable];(c) the applicant has in his employment adequate and competent persons who havethe experience, capacity and ability of managing the business of the 29[custodian];(d) the applicant has prepared a complete manual, setting out the systems andprocedures to be followed by him for the effective and efficient discharge of hisfunctions and the arms length relationships to be maintained with the otherbusinesses, if any, of the applicant ;(e) the applicant is a person who has been refused a certificate by the Board or whosecertificate has been cancelled by the Board ;(f) the applicant , his director, his principal officer or any of his employees is involvedin any litigation connected with the securities market;(g) the applicant , his director, his principal officer or any of his employees has at anytime been convicted of any offence involving moral turpitude or of any economicoffence;30[(gg)the applicant is a fit and proper person;] and(h) the grant of certificate is in the interest of investors .

6A For the purpose of determining whether an applicant or the 32[custodian] is a fit and proper person the Board may take into account the criteria specified in Schedule

2008 ]

7 (1) The capital requirement referred to in clause (a) of sub-regulation (1) of regulation 6 shall be a net worth of a minimum of rupees fifty crores. means the paid-up capital and the free reserves as on the date of the application.

7 (2) Notwithstanding anything contained in sub-regulation (1) any 33[custodian] which(a) has been approved by the Board under the provisions of Securities and ExchangeBoard of India (Mutual Fund) Regulations, 1993, or the Securities and ExchangeBoard of India (Foreign Institutional Investors) Regulations, 1995, or theGovernment of India Guidelines for Foreign Institutional Investors dated September14, 1992, even if it does not have the net worth specified in sub-regulation (1) maycontinue to function as a 34[custodian] and shall within a period of one year from thedate of commencement of these regulations raise its net worth to that specified insub-regulation (1):35[Provided that the period specified above may be extended by the Board upto amaximum of 5 years;](b) has made an application under regulation 3 shall be permitted to fulfil his capitaladequacy requirements within one month of the receipt of certificate underregulation 8.

8 (1) After considering the application under regulation 3, with reference to the matters specified in regulation 6, if the Board on being satisfied that all particulars sought have been furnished and the applicant is eligible for the grant of a certificate, shall send an intimation of the same to the applicant .

8 (2) On receipt of an intimation from the Board under sub-regulation (1), the applicant shall pay to the Board a registration fee specified in Part A of Second Schedule in the manner specified in Part B thereof.

2004 ─The provisions of the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 shall, as far as may be, apply to all applicant s or the custodians of securities under these regulations." Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 33 Substituted ibid for the words “custodian of securities. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.(3) The Board shall thereafter grant a certificate in Form B to the applicant on receiptof the registration fee:36[Provided that the Board may restrict the certificate of registration to providingcustodial services either in respect of securities or 37[goods of a client or] in respectof gold or gold related instruments of a 38[mutual fund] 39[or title deeds of real estateassets held by a real estate mutual funds scheme].]40[(4) A 41[custodian] holding a certificate of registration as on the date ofcommencement of the Securities and Exchange Board of India (Custodian ofSecurities) (Amendment) Regulations, 2006, may provide custodial services inrespect of gold or gold related instruments of a mutual fund only after taking priorapproval of the Board.]42[(5) A 43[custodian] holding a certificate of registration as on the date ofcommencement of the Securities and Exchange Board of India (Custodian ofSecurities) (Amendment) Regulations, 2008 may provide custodial services inrespect of title deeds of real estate assets held by a real estate mutual fund scheme.]44[(6) A custodian holding a certificate of registration as on the date ofcommencement of the Securities and Exchange Board of India (Custodian ofSecurities) (Amendment) Regulations, 2018, may provide custodial services inrespect of goods only after taking prior approval of the Board.]

9 The certificate granted to 45[custodian] shall be subject to the following conditions, namely :─(a) it shall not commence any activities as 46[custodian] unless it fulfils the capitalrequirement specified in regulation 7;(b) it shall abide by the provisions of the Act and these regulations in the dischargeof its functions as 47[custodian];w.e.f. 1-1-2019.(Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.w.e.f. 1-1-2019.45 Substituted ibid for the words “custodian of securities”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.47 Substituted ibid for the words “custodian of securities”.(c) it shall enter into a valid agreement with its client for the purpose of providingcustodial services;(d) it shall pay annual fees as specified in Part A of the Second Schedule in themanner specified in Part B thereof;(e) if any information previously submitted by it to the Board is found by it to befalse or misleading in any material particular, or if there is any change in suchinformation, it shall forthwith inform the Board in writing; and

9A (1) Every certificate granted under sub-regulation (3) of regulation 8 on and after the commencement of the Securities and Exchange Board of India (Custodian of Securities) (Second Amendment) Regulations, 2006, shall be valid for a period of three years from the date of grant of registration or its renewal.

9A (2) Every certificate granted under sub-regulation (3) of regulation 8 before the commencement of the Securities and Exchange Board of India (Custodian of Securities) (Second Amendment) Regulations, 2006, shall be valid for a period

10 (1) After considering an application for grant of certificate made under regulation 3, if the Board is satisfied that a certificate should not be granted, the Board may reject the application after giving the applicant a reasonable opportunity of beingheard.

10 (2) The decision of the Board to reject the application shall be communicated within thirty days of such decision to the applicant in writing stating therein the grounds on which the application has been rejected .

10 (3) An applicant , who is aggrieved by the decision of the Board under subregulation(1) may, within a period of thirty days from the date of receipt of communicationunder sub-regulation (2), apply to the Board for re-consideration of its decision.3-2019. Prior to substitution the regulation read as below:

2019 Prior to omission the regulation read as below:

9B (1) A custodian, desirous of having its certificate renewed shall make an application to the Board for renewal of the certificate in Form A, not less than three months before the expiry of its period of validity under regulation 9A.

9B (2) The application for renewal of certificate shall be dealt with, as far as may be, as if it were an application for the grant of a fresh certificate under regulation 3 and shall be accompanied with the application fee as specified in Schedule II.”(4) The Board shall, as soon as possible, in the light of the submissions made in theapplication for reconsideration made under sub-regulation (3) and wherevernecessary, after giving the applicant a reasonable opportunity of being heard, conveyits decision in writing to the applicant .

11 Any 51[custodian] whose application for grant of certificate has been rejected by the Board shall, on and from the date of the receipt of the communication under sub- regulation (2) of regulation 10 cease to carry on any activity as 52[custodian] and shall be subject to the directions of the Board with regard to the transfer of records documents or securities that may be in its custody or control relating to its activity as 53[custodian].

12 Every 54[custodian] shall abide by the Code of Conduct as set out in the Third Schedule.

13 Where a 55[custodian] is carrying on any activity besides that of acting as 56[custodian], then,—(i) the activities relating to his business as 57[custodian] shall be separate andsegregated from all other activities;(ii) its officers and employees engaged in providing custodial services shall not beengaged in any other activity carried on by him.

14 (1) Every 58[custodian] shall have adequate mechanisms for the purposes of reviewing, monitoring and evaluating the custodian's controls, systems, procedures and safeguards. 51 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 54 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 56 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 58 Substituted ibid for the words “custodian of securities”.

14 (2) The 59[custodian] shall cause to be inspected annually the mechanism referred to in sub-regulation (1) by an expert and forward the inspection report to the Board within three months from the date of inspection.

15 No 60[custodian] shall assign or delegate its functions as a 61[custodian] to any other person unless such person is a 62[custodian]: 63[Provided that a 64[custodian] may engage the services of a person not being a custodian, for the purpose of physical safekeeping of 65[goods or] gold belonging to its client 66[including] a mutual fund having a gold exchange traded fund scheme, subject to the following conditions—(a) the 67[custodian] shall remain responsible in all respects to its client forsafekeeping of the 68[goods or] gold kept with such other person, including anyassociated risks;(b) all books, documents and other records relating to the 69[goods or] gold so keptwith the other person shall be maintained in the premises of the custodian or if theyare not so maintained, they shall be made available therein, if so required by theBoard;(c) the 70[custodian] shall continue to fulfill all duties to the clients relating to thegold 71[goods or] so kept with the other person, except for its physical safekeeping.]Separate custody account.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.61 Substituted ibid for the words “custodian of securities”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.w.e.f. 1-1-2019.66 Substituted ibid for the word “being”Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.w.e.f. 1-1-2019.69 Inserted ibid.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.

16 Every 72[custodian] shall open a separate custody account for each client , in the name of the client whose securities are in its custody and the assets of one client shall not be mixed with those of another client .

17 Every 73[custodian] shall enter into an agreement with each client on whose behalf it is acting as 74[custodian] and every such agreement shall provide for the following matters namely:─(a) the circumstances under which the 75[custodian] will accept or release securities76[, goods]77[, assets or documents] from the custody account;(b) the circumstances under which the 78[custodian] will accept or release moniesfrom the custody account;(c) the circumstances under which the 79[custodian] will receive rights orentitlements on the securities 80[or goods] of the client;(d) the circumstances and the manner of registration of securities in respect of eachclient; and(e) details of the insurance, if any, to be provided for by the 81[custodian].

18 (1) Every 82[custodian] shall have adequate internal controls to prevent any manipulation of records and documents including audits for securities 83[, goods] and rights or entitlements arising from the securities 84[and goods] held by it on behalf of its client. 72 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 74 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 76 Inserted ibid. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 79 Substituted ibid for the words “custodian of securities”.w.e.f. 1-1-2019.81 Substituted ibid for the words “custodian of securities”.Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.83 Inserted ibid.w.e.f. 1-1-2019.

18 (2) Every 85[custodian] shall have appropriate safekeeping measures to ensure that

19 (1) Without prejudice to the provisions of any other law for the time being in force every 88[custodian] shall maintain the following records and documents, namely:─(a) records containing details of securities 89[, goods] 90[, assets or documents]received and released on behalf of each client;(b) records containing details of monies received and released on behalf of eachclient;(c) records containing details of rights or entitlements of each client arising from thesecurities held on behalf of the client;(d) records containing details of registration of securities in respect of each client;(e) ledger for each client;(f) records containing details of instructions received from and sent to clients; and(g) records of all reports submitted to the Board.

19 (2) Every 91[custodian] shall intimate to the Board the place where the records and documents under sub-regulation (1) are maintained.

19 (3) Every 92[custodian] shall preserve the records and documents maintained under

19A (1) Every 94[custodian] shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government and for redressal of investors' grievances.

19A (2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him.] Information to the Board . 85 Substituted ibid for the words “custodian of securities”. 86 Inserted ibid. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 89 Inserted ibid. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 92 Substituted ibid for the words “custodian of securities”.

20 (1) The Board may, at any time, call for any information from a 95[custodian] with respect to any matter relating to its activity as 96[custodian].

20 (2) Where any information is called for by the Board under sub-regulation (1), it shall be the duly of the 97[custodian] to furnish such information within such

21 (1) The Board may appoint one or more persons as inspecting officer to undertake inspection of the hooks of account, records and documents of the 98[custodian] for any of the following purposes, namely:─(a) to ensure that the books of account, records and documents are being maintainedby the 99[custodian] in the manner specified in these regulations;(b) to investigate into complaints received from investors , clients or any otherperson, on any matter having a bearing on the activities of the 100[custodian];(c) to ascertain whether the provisions of the Act and these regulations are beingcomplied with by the 101[custodian]; and(d) to investigate suo motu into the affairs of the 102[custodian] in the interest of thesecurities market or in the interest of investors .

22 (1) Before ordering an inspection under regulation 21 the Board shall give not less than ten days notice to the 103[custodian].

22 (2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given , it may by an order in writing direct that the inspection of the affairs of the 104[custodian] be taken up without such notice. 95 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 98 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 101 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 103 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.

22 (3) During the course of an inspection, the 105[custodian] against whom the inspection is being carried out shall be bound to discharge his obligations as provided in regulation 23.

23 (1) It shall be the duty of the 106[custodian] whose affairs are being inspected, and of every director, officer and employee thereof to produce to the inspecting officer such books, securities, accounts, records and other documents in its custody or control and furnish him with such statements and information relating to his activities of the 107[custodian], as the inspecting officer may require, within such reasonable period as the inspecting officer may specify.

23 (2) The 108[custodian] shall allow the inspecting officer to have reasonable access to the premises occupied by such custodian or by any other person on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the 109[custodian] or such other person and also provide copies of documents or other materials which in the opinion of the inspecting officer are relevant for the purposes of the inspection.

23 (3) The inspecting officer , in the course of inspection, shall be entitled to examine or to record the statements of any director , officer or employee of the 110[custodian].

23 (4) It shall be the duty of every director, officer or employee of the 111[custodian] to give to the inspecting officer all assistance in connection with the inspection, which the inspecting officer may reasonably require.

24 The inspecting officer shall, as soon as possible, on completion of the inspection submit an inspection report to the Board : Provided that if directed to do so by the Board , he may submit an interim report. 112[Action on inspection or investigation report. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 106 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 108 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 110 Substituted ibid for the words “custodian of securities”. Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019. 2002, w.e.f. 27-9-2002. Prior to its substitution, regulation 25 read as under: “25. (1) Communication of findings etc. to the custodian of securities of securities.─The Board shall, after consideration of the inspection report or the interim report referred to in regulation 24, communicate the findings of

25 The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under 113[Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008].]

25A The Board shall have the power to appoint an auditor to inspect or investigate, as the case may be, into the books of account, records, documents or affairs of the applicant or the custodian, as the case may be; Provided that the auditor s so appointed shall have the same powers as vested in the inspecting officer under regulation 21 and the applicant or custodian and its directors, officers and employees shall be under the same obligations, towards the auditor so appointed, as are mentioned in regulation 23.

25B The Board shall be entitled to recover from the custodian or the applicant , as the case may be, such expenses including fees paid to the auditors as may be incurred by it for the purposes of inspecting the books of account, records and documents of

26 A 116[custodian] who—(2) On receipt of the reply if any, from the custodian of securities, the Board may call upon the custodian of securitiesto take such measures as the Board may deem fit in the interest of the securities market and for due compliance withthe provisions of the Act, the rules framed thereunder and these regulations.Officer and Imposing Penalty) Regulations, 2002" by the SEBI (Intermediaries) Regulations, 2008 w.e.f. 26-5-2008.2002, w.e.f. 27-9-2002. Prior to its substitution, regulation 26 read as under:“26. Suspension of certificate. The Board may suspend the certificate granted to a custodian of securities where thecustodian of securities:(a) contravenes any of the provisions of the Act, the rules framed thereunder or these regulations;(b) fails to furnish any information relating to his activity as custodian of securities as required by the Board ;(c) furnishes to the Board information which is false and misleading in any material particular;(d) does not submit periodic returns or reports as required by the Board ;(e) does not co-operate in any enquiry or inspection conducted by the Board ;(f) fails to update its systems and procedures as recommended by the Board ;(g) fails to resolve the complaints of clients or fails to give a satisfactory reply to the Board in this behalf;(h) is guilty of misconduct or makes a breach of the Code of Conduct specified in the Third Schedule;(i) fails to pay annual fees,shall be dealt with in the manner provided under the Securities and Exchange Board of India (Procedure for HoldingEnquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002."Securities) (Amendment) Regulations, 2018, w.e.f. 1-1-2019.(a) contravenes any of the provisions of the Act, the rules framed thereunderor these regulations;(b) fails to furnish any information relating to his activity as 117[custodian] asrequired by the Board ;(c) furnishes to the Board information which is false and misleading in anymaterial particular;(d) does not submit periodic returns or reports as required by the Board ;(e) does not co-operate in any enquiry or inspection conducted by the Board ;(f) fails to update its systems and procedures as recommended by the Board ;(g) fails to resolve the complaints of clients or fails to give a satisfactory replyto the Board in this behalf;(h) is guilty of misconduct or makes a breach of the Code of Conduct specifiedin the Third Schedule;(i) fails to pay annual fees,shall be dealt with in the manner provided under 118[Chapter V of the Securities andExchange Board of India (Intermediaries) Regulations, 2008].]

33 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .

33 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. a live testing environment where new products, processes, services, business models,etc. may be deployed on a limited set of eligible customers for a specified period of117 Substituted ibid for the words “custodian of securities”.Imposing Penalty) Regulations, 2002" by the SEBI (Intermediaries) Regulations, 2008, w.e.f. 26-5-2008.Regulations, 2002, w.e.f. 27-9-2002.time, for furthering innovation in the securities market , subject to such conditions as