The Securities and Exchange Board of India (SEBI) has proposed that networth requirement be increased from Rs 50 crore to Rs 100 crore for custodian. In a consultation paper released today, it noted that considering the increased scope of services and the exponential growth in the volume of business provided by Custodians to its clients, Custodians are prone to fraud and operational risks. Such risk can result in financial losses which may lead to erosion of the net worth of the Custodian. Higher net worth requirements help provide a cushion against potential fraud losses and operational risks. Custodians with higher net worth may be better equipped to absorb losses, maintain operational stability and enhance the trust of their clients and stakeholders in the ecosystem.
It also noted, among other things that the Custodian shall ensure that the Board is promptly informed about any action, legal proceedings, etc., initiated against it in respect of material breach or non-compliance by it, of any law, Rules, regulations, directions of the Board or of any other regulatory body. . The Custodian shall be responsible for the acts or omissions of its employees and agents in respect of the conduct of its business.The Custodian shall make all efforts to protect the interests of its clients and shall act in the best interest of its clients.
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