Securities and Exchange Board of India (Vault Managers) Regulations, 2021

On December 31, 2021, the Securities and Exchange Board of India notifies Securities and Exchange Board of India (Vault Managers) Regulations, 2021.

Key features of the Regulation:

• Application for registration: Any person intending to carry on the business as a Vault Manager shall make an application to the Board for grant of a certificate of registration. An application for grant of a certificate  shall be made in Form A of the First Schedule and shall be accompanied by a non-refundable application fee in the manner as specified in the Second Schedule.

Note: Vault Manager means any person who carries on or intends to carry on the business of providing vaulting services.

• Eligibility criteria: The applicant shall fulfil the following criteria, namely:
  

1. 1. The applicant shall be a body corporate incorporated in India.
   2. The applicant shall have the minimum net worth of fifty crores rupees.
   3. The applicant shall furnish refundable Financial Security Deposit as may be specified by the Board.
   4. The applicant shall have the infrastructure as specified by the Board for safe deposit, storage and withdrawal of gold.
   5. The applicant shall have adequate insurance to cover losses as may be specified by the Board.
   6. The applicant shall have a Standard Operating Procedure (SOP) in respect of all the recognized vaults which shall specify the following:
      i. Procedures for deposit and withdrawal of gold;
      ii. Procedures for facilitating assaying of gold, wherever required;
      iii. Maintenance of details of persons appointed by the Vault Manager for creating the Electronic Gold Receipt;
      iv. Know Your Depositor requirements;
      v. Security policy for ensuring the safety of gold including from theft or burglary;
      vi. Procedure for dealing with losses including those caused due to theft, fire, burglary, fraud, negligence as well as other force majeure events;
      vii. Procedure for creation of Electronic Gold Receipt;
      viii. Procedure for maintenance of record;
      ix. Procedure for periodic reconciliation of physical gold with the records maintained by it and with the records of the Depository;
      x. Grievance redressal procedures;
      xi. Maintenance of adequate infrastructure, office space, technology and computer systems capability; and
      xii. Any other criteria as may be specified by the Board.

• General obligations: Key obligations are:
  

1. 1. Responsible for taking the deposit of the gold in the manner specified in Chapter IV of these regulations.
   2. Gold deposited with the Vault Manager shall be in form and manner as specified by the stock exchange.
   3. Store the gold only in recognized vaults.
   4. Ensure the quality specifications of the gold at the time of deposit as per the gold standard.
   5. Create Electronic Gold Receipt in accordance with regulation 18.
   6. Avoid creating an Electronic Gold Receipt without underlying physical gold.
   7. Maintain records of all transactions or operations pertaining to the recognized vault(s).
   8. Have appropriate safekeeping measures, as may be specified by the Board, to ensure that deposits, records and documents are protected at all times.
   9. Have Data Recovery System in place to prevent loss or damage of electronic records.
   10. Take necessary steps to maintain the quality and quantity of gold stored in the recognised vault(s).
   11. Have adequate internal controls to prevent any manipulative activity.
   12. Devise procedures for periodic reconciliation of physical gold with the corresponding record of Electronic Gold Receipts maintained by it and the depositories.
   13. In case of any discrepancy between electronic records of the depository and physical gold with the Vault Manager, the Vault Manager shall ensure to resolve the same expeditiously, failing which the Vault Manager shall be liable for such discrepancy.
   14. Deliver the gold, to the beneficial owner of Electronic Gold Receipt, after receiving specific instructions from the Depository.
   15. Ensure that while withdrawing gold, the Beneficial Owner acknowledges the receipt of the gold in the form and manner as specified by the Vault Manager.
   16. Shall not differentiate between any of the depositors for providing vaulting services.
   17. Shall not create Electronic Gold Receipt in its own name with respect to the gold stored in its recognized vaults.
   18. Shall not sell, remove, dispose or create any interest, including by way of pledge or hypothecation, in the gold deposited in the vault(s) for the creation of Electronic Gold Receipt, except in such manner as may be specified by the Board.
   19. Have adequate mechanisms for the purposes of reviewing, monitoring and evaluating the vault’s systems, procedures and safeguards.
   20. Ensure delivery of gold to the beneficial owner as per the gold standard.
   21. Disclose all charges related to its services on its website.
   22. Submit periodic reports to the Board in such form and manner, including in electronic form, as may be specified by the Board in this behalf.