SEBI prohibits sub-contracting of core biz by intermediaries

As per the guidelines announced on Thursday, intermediaries like brokers and depository participants “desirous of outsourcing their activities shall not outsource their core business activities and compliance functions”

Mumbai: Capital market regulator Securities and Exchange of India (SEBI) on Thursday released guidelines on outsourcing by intermediaries like brokers and depository participants that prohibit sub-contracting of core business activities, reports PTI.

The guidelines also direct them to put in place a comprehensive policy on the outsourcing of activities.

“An intermediary seeking to outsource activities shall have in place a comprehensive policy to guide the assessment of whether and how those activities can be appropriately outsourced,” SEBI said in a circular.

The board or partners of the intermediary will have the responsibility for the outsourcing policy and overall responsibility for related activities undertaken under it, SEBI said.

The principles for outsourcing by intermediaries have been framed based on views given by various intermediaries, stock exchanges and depositories, it added.

“The intermediaries desirous of outsourcing their activities shall not outsource their core business activities and compliance functions,” SEBI said.

Such functions include activities like execution of orders and monitoring of trading activities of clients in case of stock brokers, dematerialisation of securities in case of depository participants and investment related activities in case of mutual funds and portfolio managers.

SEBI said the intermediaries shall be responsible for reporting of any suspicious transactions to Financial Intelligence Unit or any other competent authority in respect of activities carried out by the third parties.

“In view of the changing business activities and complexities of various financial products, intermediaries shall conduct a self assessment of their existing outsourcing arrangements within a time bound plan, not later than six months from the date of issuance of this circular and bring them in line with the requirements of the guidelines/ principles,” it said.

Regarding the principles for outsourcing, the regulator directed the intermediaries to establish a comprehensive outsourcing risk management programme to address outsourced activities and the relationship with the third party.

“The intermediary shall ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers and regulators, nor impede effective supervision by the regulators,” SEBI said and also asked them to conduct due diligence while selecting the third party.

All relationship between market intermediaries and the outsourcing partners have to have written contracts describing the material aspects of the arrangement.

“The intermediary and its third parties shall establish and maintain contingency plans, including a plan for disaster recovery and periodic testing of backup facilities,” SEBI directed and added that intermediaries should also ensure that the outsourcing firm protect confidential information.

User

SEBI sets up international advisory board; first meeting next month

The IAB would help capital market regulator SEBI better understand the global market trends and emerging developments and challenges. The decision to set up an IAB was taken by the SEBI board in its meeting on 28th July, pursuant to which SEBI began the process of setting up this board

New Delhi: At a time when global financial developments hold the key to stock market movements in India, the Securities and Exchange Board of India (SEBI) has set up an international advisory board (IAB), which would hold its first meeting next month, reports PTI.

The IAB would comprise of seven members, including SEBI chairman UK Sinha.

The six outside members include Viral Acharya from New York University’s Stern School of Business, Singapore Exchange’s independent director Jane Diplock, Harvard Business School’s Mark Maletz, Maureen O’Hara from Cornell University’s Johnson Graduate School of Management, Arvind Panagariya from Columbia University’s School of International & Public Affairs and China Banking Regulatory Commission’s Andrew Sheng.

The first meeting of the IAB is scheduled on 27 January 012 in New Delhi, as per a memorandum submitted to SEBI board in its last meeting on 24th November.

The IAB would help capital market regulator SEBI better understand the global market trends and emerging developments and challenges.

The decision to set up an IAB was taken by the SEBI board in its meeting on 28th July, pursuant to which SEBI began the process of setting up this board.

For the probable names, SEBI had sought suggestions from its whole-time members, as also from the two former Reserve Bank of India (RBI) governors YV Reddy and Bimal Jalan, besides Raghuram Rajan, professor of finance, University of Chicago, and Kaushik Basu, Chief Economic Adviser, ministry of finance.

The IAB would discuss various macro-level and strategic issues and help SEBI in its mandate to protect the interests of investors, promote the market growth and regulate it.

All the recommendations of the IAB, along with the actions taken by SEBI, thereon, will be reported to the SEBI board.

It was previously decided that the members of the IAB will be nominated by the SEBI chairman, from amongst the eminent persons in law, finance, economics and other related areas.

The IAB members would have a three-year term, and would be paid “an honorarium of $2,500 for each meeting.” SEBI would also arrange for air travel in business class, five-star accommodation and other incidental matters for the members.

The IAB would meet twice in a year in India, and a third meeting, if required, would be organized by SEBI through video-conferencing.

The SEBI chairman would preside the IAB meetings, where all the whole-time members of SEBI would be permanent invitees.

SEBI chairman can bring in the senior functionaries from related organizations or other experts as special invitees.

At its board meeting in July, SEBI had told its board that the events related to the recent global financial crisis have highlighted the need for continuous assessment of various developments and an immediate regulatory response.

User

RBI imposes curbs on forward contracts to check rupee slide

The RBI has decided to withdraw the facility of re-booking forex contracts by companies and FIIs and reduced across-the- board exposure limits of banks which are authorised to deal in the foreign currency

Mumbai: The Reserve Bank of India (RBI) on Thursday swung into action to check slide in rupee value against dollar and speculations by imposing restrictions with immediate effect on forward trading in the local currency by foreign institutional investors (FIIs) and traders and capped banks exposure to the forex market, reports PTI.

The RBI has decided to withdraw the facility of re-booking forex contracts by companies and FIIs and reduced across-the- board exposure limits of banks which are authorised to deal in the foreign currency.

The central bank said these steps have been taken in view of the “developments in the foreign exchange market”. The rupee on Thursday slipped to the sub-54 level for the first time in its history and touched a low of 54.30 against the dollar. In the last nearly four and half months, the rupee has declined by about 20% against the dollar.

The forward contracts booked by resident, irrespective of the type and tenor of the underlying exposure, “once cancelled cannot be re-booked”, RBI said in a notification.

It has also reduced the limit for hedging of foreign currency risks for importers/exporters from 75% to 25% of the average actual import\export turnover in the past three years.

It further said all the forward contracts booked by exporters and importers would be on “fully deliverable basis.

In case of cancellations, exchange gain, if any, should be passed on to the customer”.

Besides, authorised dealers have been asked by the RBI to ensure that all transactions on behalf of their clients would be on actual remittances and delivery basis and could not be cancelled and settled in cash.

FIIs have been barred from re-booking of cancelled forward contracts. However, they can roll over such contracts on or before maturity.

The central bank also said the board of directors of authorised dealer banks would reduce overnight exposure limit for treasury operations.

“Net Overnight Open Position Limit (NOOPL) of authorised dealers would be reduced across the board. Revised limits of individual banks are being advised to the authorised dealers separately,” it said.

According to the circular, authorised dealer banks would not be allowed to exceed the NOOPL limit during the intraday trade.

Describing the RBI’s decision as a “very proactive step”, NS Venkatesh, treasury head of IDBI Bank, said, “It will cool the forex market and help in curbing speculation and reducing volatility. Normal demand (of dollar) will only be met.” 

On the outlook of rupee, he said, “I expect the rupee to open tomorrow at Rs53 level from the close of Rs53.64 and hover around Rs52.50- Rs53 per dollar.”

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)