SEBI has issued standard operating guidelines for the vault managers and depositories – Electronic Gold Receipts ( EGR ) segment in order to ensure ease of compliance for the market participants in the EGR ecosystem as well as effective implementation of the Regulations , Standard Operating Guidelines under Regulation 28 of SEBI (Vault Managers) Regulations, 2021.
Key points of the Standard Operating Guidelines for the Vault Managers and Depositories are as follows:
Financial Security Deposit (FSD)
- Quantum: The Vault Manager shall furnish FSD of Rs. 10 lakhs to any one of the two Depositories (viz. NSDL or CDSL) before obtaining a certificate of registration from SEBI. This is the minimum amount of FSD which has to be maintained with Depository at all points of time.
- Use of FSD: The Depository shall put in place a procedure to utilize the FSD for compensating the aggrieved client, in any such losses caused to a client that have been appropriately established by the Depository against the Vault Manager; or in case of loss arising from any action or inaction of the Vault Manager that prevents the client from exercising, in whole or in part, their rights while availing vaulting services.
Corporate Governance
The Vault Manager shall designate one of its employees as a Compliance Officer who would be responsible for monitoring the compliance with relevant Acts, rules and regulations, notifications, guidelines and circulars issued by relevant authorities from time to time. The Compliance Officer would also be responsible for ensuring that all applicable norms are followed by the Vault Manager and should issue a declaration to that effect to the Depository for every quarter, within seven working days from the end of the quarter.
Infrastructure/safekeeping features
The Vault Manager shall ensure the following with respect to the recognized vaults:
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The recognized vaults shall be under the absolute control of the Vault Manager. In case of a leased property, the Vault Manager shall hold a direct lease for at least three years and it shall be ensured that no third party including the owner/lessor of the recognized vault has any role to play in the operations of the said recognized vault.
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The recognized vaults are well connected with rail and/or road networks and have sufficient space for parking and movement of loading/ unloading vehicles. The vaults must be accessible by armoured vehicles.
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The recognized vaults shall have strong rooms of adequate usable size for storage and handling of gold. The strong rooms must be of adequate strength to ensure protection from possible threats, such as, fire, theft, burglary, etc.
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The gold deposited for creation of EGRs shall be stored in separate racks providing clear- cut demarcation of EGR business from its other businesses. The storage area within the recognized vault shall be free from materials which may adversely affect the quantity or quality of gold.
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There must be an electronic balance or any other similar balance in each recognized vault for weighing the gold.
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The recognized vaults shall have communication link with the nearest police station.
Insurance
- The Vault Manager shall take insurance, to fully cover the value of the gold stored in the recognized vaults, against all potential perils relevant to gold for which insurance cover is available.
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The Vault Manager shall take insurance to cover the risk from theft, fire, burglary, fraud, negligence and force majeure events. They shall also take Fidelity Guarantee and Crime Insurance and Professional Indemnity Cover tocover all potential losses.
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The Vault Manager shall undertake to buy insurance cover against terrorism, for recognized vaults located in areas which are notified under the Armed Forces Special Powers Act (AFSPA).
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The value of gold to be insured should be marked to market on replacement value on an ongoing basis.
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