SEBI notifies Vault Managers Regulations, 2021

Notification No. SEBI/LAD-NRO/GN/2021/61, Dated: 31.12.2021

The SEBI has notified the SEBI (Vault Managers) Regulations, 2021. The norms prescribe provisions regarding:

(i) Application for registration for vault managers

(ii) Eligibility criteria

(iii) Duties and Obligations of managers

(iv) Inspection and Audit and

(v) Miscellaneous provision.

“Vaulting service” about gold means the storage and safekeeping of gold deposited with the Vault Manager, by the depositor, for trading in Electronic Gold Receipt and providing services.

“Depositor” means a person who owns the gold deposited with the vault for the creation of Electronic Gold Receipt and its trading on a recognized stock exchange.

The provisions of the Vault Managers Regulations shall come into force w.e.f. 31-12-2021. The key provisions of Vault Managers Regulations, 2021 are discussed hereunder:

1. Meaning of Vaulting Services

As per Regulation 2(m) of the norms, Vaulting service” in relation to gold means the storage and safekeeping of gold deposited with the Vault Manager, by the depositor, for the purpose of trading in Electronic Gold Receipt and providing services incidental thereto, and includes—(i)utilizing the services of assayers empanelled with the Stock Exchanges for testing as per the gold standard, wherever required;(ii)coordination with depositories for creation, transfer and extinguishment of Electronic Gold Receipt; and(iii)providing deposit, storage and withdrawal services to the beneficial owners

2. Registration for vault managers

Under the norms, any person intending to carry on the business as a Vault Manager shall make an application to the Board (SEBI) for a grant of a certificate of registration. An application for a grant of a certificate shall be made in Form A of the First Schedule and shall be accompanied by a non-refundable application fee.

3. Eligibility criteria

(a) The applicant shall be a body corporate incorporated in India.

(b) The applicant shall have a minimum net worth of fifty crores rupees.

(c) The applicant shall furnish a refundable Financial Security Deposit as may be specified by the Board.

(d) The applicant shall have the infrastructure as specified by the Board for a safe deposit, storage and withdrawal of gold.

(e) The applicant shall have adequate insurance to cover losses as may be specified by the Board.

(f) The applicant shall have a Standard Operating Procedure (SOP) in respect of all the recognized vaults.

4. Duties and Obligations of Vault managers

The Vault Manager shall store the gold only in recognized vaults. The gold deposited with the Vault Manager shall be in form and manner as specified by the stock exchange. He shall ensure the quality specifications of the gold at the time of deposit as per the gold standard. Vault Manager shall not create an Electronic Gold Receipt without underlying physical gold. He shall maintain records of all transactions or operations about the recognized vault(s) and also shall have Data Recovery System in place to prevent loss or damage of electronic records.

They shall have adequate internal controls to prevent any manipulative activity and shall devise procedures for periodic reconciliation of physical gold with the corresponding record of Electronic Gold Receipts maintained by it and the depositories.

Recognized vault” means the premises encompassing strong room(s)set up and managed by the Vault Manager and which conforms with all the requirements specified by the Board for the purpose of providing vaulting services;

5. Provisions relating to Inspection and Audit

The Board may appoint one or more persons as inspecting officer(s) to undertake inspection of the books of accounts, records, documents, and deposits of gold of the Vault Manager for any purpose, including the following, namely:

(a) to ensure that the books of account, records, and documents are being maintained by the Vault Manager;

(b) to examine the complaints, if any, received from investors or any other person on a matter having a bearing on the activities of the Vault Manager;

(c) to ascertain whether the provisions of the Act, these regulations and circulars and guidelines issued thereunder are being complied with by the Vault Manager;

(d) to inspect the affairs of the Vault Manager in the interest of the securities market or the interest of investors.

Upon completion of the inspection, the inspecting officer shall submit an inspection report to the Board. The Board shall, after consideration of the inspection report, take such action as the Board may deem fit and appropriate.