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Securities and Exchange Board of India CIRCULAR CIR/MRD/DP/19/2015 December 09, 2015
To, Subject: Outsourcing by Depositories 1. SEBI has vide circular CIR/MIRSD/24/2011 dated December 15, 2011 prescribed Guidelines on Outsourcing of Activities by Intermediaries. These guidelines list out certain principles for outsourcing to be followed by all the intermediaries registered with SEBI. 2. The Depository System Review Committee (DSRC) examined the outsourcing practice followed by the Depositories on various parameters. Based on recommendations by DSRC, the depositories are advised to ensure the following: i. Depositories shall formulate and document an outsourcing policy duly approved by their Board based on the guidelines given below and the principles outlined in the SEBI circular CIR/MIRSD/24/2011 dated December 15, 2011.
Core activities of Depositories
iii. Core IT (Information Technology) support infrastructure / activities for running the core activities of depositories shall not be outsourced to the extent possible.
Due Diligence
Risk Management & Monitoring vi. Depositories shall ensure that risk impact analysis is undertaken before outsourcing any activity and appropriate risk mitigation measures like back up/ restoration system are in place. vii. An effective monitoring of the entities selected for outsourcing shall be done to ensure that there is check on the activities of outsourced entity. Depositories shall strive to automate their processes and workflows to the extent possible which shall enable real time monitoring of outsourced activities.
Audit
3. The Depositories shall implement the provisions of this circular within three months from the date of this circular. The Depositories are advised to:- 4. This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Section 19 of the Depositories Act, 1996 in the interests of investors in securities and to promote the development of, and to regulate the securities market. Yours faithfully
Susanta Kumar Das
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