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CHIEF GENERAL MANAGER
MARKET INTERMEDIARIES REGULATION AND SUPERVISION DEPARTMENT
MIRSD/DPS-III/ Cir - 9
/07
July 3, 2007
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The Chairman &
Managing Director
National
Securities Depository Ltd.
Trade World,
Kamala Mills
Compound,
Senapati
Bapat Marg,
Lower
Parel,
Mumbai - 400 013 |
The Managing
Director & CEO
Central Depository
Services (India)
Ltd.
Phiroze
Jeejeebhoy
Towers,
Dalal
Street, Fort,
Mumbai 400 023 |
Dear Sir/s,
Sub: Supervision of
branches of depository participants
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It has come to
SEBI's notice that the Depository
Participants (DPs) are operating through
branch offices which are having Depository Participant Modules (DPMs)
directly linked to the Depository server and branch offices which are
connected through back offices software of the DP. Certain
DPs are connected with the Depository
through one or more DPMs. Some of the
DPs have offline branches which function
either as full fledged braches offering all DP services or only as
collection centre.
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In terms of
Regulation 46 of the SEBI (Depositories and Participants) Regulations,
1996, every DP shall have adequate mechanism for the purpose of
reviewing, monitoring and evaluating its internal accounting controls
and systems. Further, clause 19 of the Code of Conduct for Participants
contained in the Third Schedule to the Regulations inter
alia states that the DP shall ensure that it
has satisfactory internal control procedure in place. It is clarified
that these provisions apply to DPs in
respect of all their branches also. DPs are
therefore required in terms of these provisions to put in place
appropriate mechanisms to ensure that their branches are carrying on the
operations in compliance with the applicable regulations, bye-laws, etc.
Further, DPs are also required to put in
place suitable internal control systems to ensure that all branches are
exercising due diligence in opening accounts, complying with KYC
requirements, in ensuring systems safety in complying with client
instructions, manner of uploading client instructions, in verifying
signatures and in maintaining client records, etc.
DPs shall also ensure that the branches are suitably integrated.
The DPs whose systems do not measure up to
the above are hereby advised to ensure such compliance immediately.
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Depositories shall
examine the adequacy of the above mechanisms during their inspections of
DPs. The Depositories shall also carry out
surprise inspections/ checks of the DP branches apart from the regular
inspection of the DPs.
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Depositories shall
also put in place appropriate mechanisms for monitoring opening of
branches by DPs.
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The Depositories are
advised to:-
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Bring the
provisions of this circular to the notice of the
DPs of the Depositories and also to disseminate the same on
the website;
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Include the
aforesaid clarifications, as applicable, in the advertisement
campaigns released by them from time to time for better understanding
of the investors;
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Make amendments to
the relevant bye-laws, rules and regulations for the implementation
of the above decision immediately, as may be applicable/necessary;
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Communicate to
SEBI the status of the implementation of the provisions of this
circular in the Monthly Development Report.
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This circular is
being issued in exercise of the powers conferred by Section 11 (1) of
Securities and Exchange Board of India Act, 1992 to protect the interest
of investors in securities and to promote the development of, and to
regulate, the securities market.
Yours faithfully,
P K
Kuriachen
Go to "SEBI
Update - 2007" Listings
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