PFRDA (Custodian of Securities) Regulations, 2015: Proposed Amendments

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(iii) collecting the benefits or rights
accruing on the securities or assets;

(iv) informing about the actions taken or to be taken by the issuer of the securities, having a bearing on the benefits or rights accruing on the securities or assets held; and

(v) maintaining and reconciling records of the services referred to in sub-clauses (i) to (iv);

eligibility conditions specified in
regulation 8 and desirous to undertake the business of custodian of securities may make an application accompanied by non-refundable application fee as specified in Part A of the Second Schedule and to be paid in the manner specified in Part B thereof.

(a) it is not complete in all respects and does not conform to the requirements specified in these regulations;

(b) it does not contain such additional information as required by the Authority;

(c) it is incorrect, false or misleading;

(d) the applicant is not in compliance with the minimum eligibility requirements as specified in these regulations;

(e) it, in the opinion of the Authority, is not in the interest of subscribers or the objective of orderly development of pension sector or both, or is not in the interest of the National Pension System or any other pension scheme.

(a) is not complete in all respects and does not conform to the requirements specified in these regulations;

(a) does not contain such additional
information as required by the Authority;

(b) is incorrect, false or misleading or omits to disclose material information;

(d) the applicant is not in compliance with the minimum eligibility requirements as specified in these regulations and the criteria in the selection process;

(e) the application in the opinion of the Authority, is not in the interest of
subscribers or the pension schemes to which the Act applies

[Provided that in the same group where the sponsor of a Pension Fund, Trustee Bank or central record keeping agency or their associates, are holding 50 percent or more of the voting rights of the share capital of a custodian, it can apply to become Custodian with the Authority under following conditions:

(i) the sponsor, associates or the holding company, as the case may be, should have net worth of at least Rs.50,000 crore at all points of time;

(ii) 50 per cent or more of the directors of the custodian shall be those who do not represent the interests of the sponsor or its associates;

(iii) neither the custodian nor the pension fund company shall be a subsidiary of each other;

(iv) no person shall be a director of both the custodian and the pension fund company; and

(v) the custodian and the pension fund company shall sign an undertaking that they will act independently of each other in their dealings with the schemes. Explanation – For the purpose of this proviso the expression “holding company” shall have the meaning as provided in Section 2(46) of the Companies Act, 2013[Act No.18 of 2013]]

[Provided that in the same group where the sponsor of a Pension Fund or central record keeping agency or their associates, are holding twenty percent or more of the voting rights of the share capital of a

custodian, it can apply to become
Custodian with the Authority under following conditions:

(i) the sponsor, associates or the holding company, as the case may be, should have net worth of at least Rs. Fifty thousand crore at all points of time;

(iv) majority of the directors of the
custodian shall be those who do not represent the interests of the sponsor or its associates;

(i) neither the custodian nor the pension fund shall be a subsidiary of each other;

(iv) no person shall be a director of both the custodian and the pension fund; and

(v) the custodian and the pension fund shall sign an undertaking that they will act independently of each other in their dealings with the schemes.

Explanation – For the purpose of this proviso the expression “holding company” shall have the meaning as provided in Section 2(46) of the Companies Act,
2013[Act No.18 of 2013]]

Explanation: ‘Principal Officer’ for this purpose shall mean applicant’s key
managerial personnel as defined under Section 2(51) of the Companies Act, 2013

(a) transfer the assets, records, documents or information that are in its control to another custodian of securities, as directed by the Authority, at its own cost;

(b) be subject to the direction of the Authority till all such transfers or actions are completed.

information, disclosures, reports,
documents and statements relating to or after registration as custodian are true,

complete, accurate and correct in all
respects and do not contain any incorrect statement or omit to disclose any material fact and shall inform the Authority of any material change in the information or particulars previously furnished, which have a bearing on its registration;

(i) lay down internal controls to be followed and ensure that such controls are adequate and operating effectively.

(ii) make provision for compensating the subscriber for any loss on account of fraud or negligence on the part of custodian, which has been established.

Notwithstanding the above, it may at any time as it deems fit, undertake directly or through its authorized representative, or appoint an auditor, conduct an inspection or audit of the books, accounts, records including the call records and electronic records and documents of the custodian of securities for the purposes as specified under this regulation.

(1) Any custodian of securities which has not applied for or which has failed to obtain a certificate of registration afresh upon expiry of tenure or certificate of registration, or certificate of registration of which has been cancelled or suspended shall, on and from the date specified by the Authority cease to carry on any activity as custodian of securities.

cancellation of the certificate of
registration, the custodian of securities shall—

Changes in Third Schedule

(i) financial integrity;

(ii) absence of convictions or civil liabilities:

(iii) competence,

iv) good reputation and character;

v) efficiency and honesty; and An applicant shall not be considered as a ‘fit and proper person’ for the purpose of grant of certificate of registration under these regulations, if it or he incurs any of the following disqualifications, namely:-

a) the applicant or custodian of securities or its wholetime director or principal officer or managing partner has been convicted by a court for any offence involving moral turpitude, economic offence, violation of any securities law or fraud;

b) an order for winding up has been passed against the applicant;

c) the applicant or its whole-time director, or managing partner has been declared insolvent and has  not been discharged;

d) an order, other than an order of suspension of appointment as an intermediary, restraining, prohibiting or debarring the applicant or its wholetime director or principal officer or managing partner from dealing in securities in the capital market or from accessing the capital market has been passed by any regulatory authority or court. and a period of three years from the date of the expiry of the period specified in the order has not elapsed;

e) an order cancelling the appointment of the applicant has been passed by the Authority or other concerned financial sector regulator on the ground of its indulging in insider trading, fraudulent and unfair trade practices or market manipulation and a period of three years from the date of the order has not elapsed;

f) an order withdrawing or refusing to grant any license or approval to the applicant or its whole-time director or managing partner which has a bearing on the capital market, has been passed by concerned financial sector regulator or any other regulatory authority and a period of three years from the date of the order has not elapsed:

Provided that the Authority may for reasons to be recorded in writing, allow the applicant to seek appointment before the lapse of three Years referred to in clauses (d), (e) and (f) above;

(g) the applicant is financially not sound;

(h) there is a notice of any action or investigation or other proceedings of any nature whatsoever, against the applicant, or its chief executive officer, any of its directors or employees, or a related group concern, by any governmental or statutory authority which would restrain, prohibit or otherwise challenge or impede the performance of obligations as custodian of the assets regulated by the Authority, and that there is adverse proceedings against it from any financial sector regulator including the Reserve Bank of India, Insurance Regulatory and Development Authority or the Securities and Exchange Board of India, of a nature that could adversely affect the ability to provide the services as custodian for the assets regulated by the Authority;

(i) any other reason, to be recorded in writing by the Authority, which in its opinion renders such applicant custodian of securities or its whole-time director, principal officer or managing partner unfit to operate in the capital market.

Explanation.-For the purpose of clause (g), the Authority may take into consideration the capital adequacy or net worth of the applicant, wherever it has been so specified in the relevant application for certificate of registration.

(Part-A)

(a) financial integrity;

(b) absence of convictions or civil liabilities;

(c) competence;

(d) good reputation and character;

(e) efficiency and honesty; and

(f) financial solvency and net worth.

(Part-B)

A person shall not be considered as a” fit and proper person” if any of the following disqualifications are incurred:-

(1) criminal complaint or information under section 154 of the Code of Criminal Procedure, 1973 (2 of 1974) has been filed against such person by the Authority and which is pending;

(2) charge sheet has been filed against such person by any enforcement agency in matters concerning economic offences and is pending;

(3) an order of restraint, prohibition or debarment has been passed against such person by the Authority or any financial regulator or enforcement agency in any matter concerning securities laws or financial markets or insurance law and a period of three years from the date of expiry of period specified in the order has not elapsed;

(4) license or registration has been cancelled by any financial sector regulators during last five years;

(5) recovery proceedings have been initiated by the Authority against such person and are pending;

(6) an order of conviction has been passed against such person by a court for any offence involving moral turpitude or involving economic offences or fraud;

(7) any winding up proceedings have been initiated or an order for winding up has been passed against such person;

(8) any insolvency proceedings is pending against such person or where he has been declared insolvent and not discharged;

(9) such person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;

(10) such person has been categorized as a wilful defaulter;

(11) such person has been declared a fugitive economic offender;

(12) there is an order or notice of any action or investigation or other proceedings of any nature whatsoever, against the person by any governmental or statutory authority which would restrain, prohibit or otherwise challenge or impede the performance of obligations and that there is adverse proceedings against it from any financial sector regulator including the Reserve Bank of India, Insurance Regulatory and Development Authority or the Securities and Exchange Board of India, of a nature that could adversely affect the ability to provide the services as sponsor; or

(13) any other disqualification as may be specified by the Authority;