VAULT MANAGERS – PART II

[Mr. M. GOVINDARAJAN]

VAULT MANAGERS – PART II

 

Electronic Gold Receipts

If any person is desirous of depositing gold with vault manager registered with the Securities and Exchange Board of India (‘Board’ for short) he shall place a request for the same.   The original gold is not to be deposited.  For this purpose the electronic gold receipt is to be created.  This electronic gold receipt will be treated as a security.

Creation of Electronic Gold Receipts

On receipt of gold the Vault Manager shall create an Electronic Gold Receipt in the name of such depositor as beneficial owner.  He shall have authorized persons for creation of Electronic Gold Receipts. 

The Electronic Gold Receipt shall contain the following-

• Electronic Gold Receipt number;
• Name and address of the beneficial owner;
• Registration number of the Vault Manager and date up to which such registration is valid;
• Name of the vault and its complete postal address;
• Date of creation of Electronic Gold Receipt;
•  Rates of storage charges and other related charges, if any;
• Description of the gold bars including particulars of quantity, weight and purity;
• Signature of the Vault Manager or his authorized agent; and
• Any other particulars as may be specified by the Board.

The Vault Manager shall ensure that the information captured at the time of creation of Electronic Gold Receipt is accurate.

The Vault Manager shall not create an Electronic Gold Receipt without underlying physical gold.   The Vault Manager shall not create Electronic Gold Receipt in its own name with respect to the gold stored in its recognized vaults.

Demat account

Upon creation of Electronic Gold Receipt, the depository shall credit the demat account of the beneficial owner with such Electronic Gold Receipts.

Common Interface

The following details in respect of the depositor as beneficial owner shall be entered by the Vault Manager in the common interface-

• Account details of Beneficial Owner maintained with the Depository;
• Details of Depository Participant;
• Name of the Depository having account of Beneficial Owner;
• Name and address of the beneficial owner;
• PAN number of the Beneficial Owner;
• Registration number of the Vault Manager and date up to which such registration is valid;
• Name of the vault and its complete postal address;
• Date of creation of Electronic Gold Receipt;
• Rates of storage charges and other related charges, if any;
• Description of the gold bars including particulars of quantity, weight and purity;
•  Bar numbers;
• Purity Certificate;
•  Name of the refiner; and
• Any other particulars as may be specified by the Board.

Deposit of gold

 The Vault Manager shall be responsible for taking the deposit of the gold.  The Vault Manager or any person authorized in this behalf shall ensure that the gold is deposited only through an accredited refinery or a nominated agency.   The Vault Manager or any person authorized in this behalf, shall ensure compliance with the gold standard, weigh the gold bars and check necessary documentation at the time of deposit of gold.  The gold deposited with the Vault Manager shall be in form and manner as specified by the stock exchange.   The Vault Manager shall ensure the quality specifications of the gold at the time of deposit as per the gold standard.

It shall be ensured that at the time of the deposit, it has furnished acknowledgement receipt to the depositor and has collected appropriate documentation to ensure that the gold is traceable.

Reconciliation

The Vault Manager shall devise procedures for periodic reconciliation of physical gold with the corresponding record of Electronic Gold Receipts maintained by it and the depositories.   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.

Obligations of Vault Manager

• The Vault Manager shall have appropriate safekeeping measures, as may be specified by the Board, to ensure that deposits, records and documents are protected at all times.
• The Vault Manager shall have Data Recovery System in place to prevent loss or damage of electronic records.
• The Vault Manager shall take necessary steps to maintain the quality and quantity of gold stored in the recognized vault(s).
• The Vault Manager shall have adequate internal controls to prevent any manipulative activity.
• The Vault Manager shall not differentiate between any of the depositors for providing vaulting services.
• The Vault Manager 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.
• The Vault Manager shall have adequate mechanisms for the purposes of reviewing, monitoring and evaluating the vault’s systems, procedures and safeguards.

Segregation of activities

Where a Vault Manager is carrying on any activity besides vaulting services then the activities relating to his business as Vault Manager shall be separate and segregated from all other activities including earmarking separate space for storage of gold for trading of Electronic Gold Receipt and storage of goods for its other businesses.

Withdrawal of gold

A beneficial owner seeking to withdraw gold from the vault shall place a request with the depository.    The depository, after satisfying the payment of charges due to the Vault Manager, shall intimate its approval for withdrawal of gold to the concerned Vault Manager.    The Vault Manager shall hand over the gold and extinguish the Electronic Gold Receipt(s), subject to the beneficial owner producing acknowledgement of receipt and such other documents as may be specified by the Vault Manager.   The Vault Manager shall intimate the extinguishment of the Electronic Gold Receipt(s) to the depository.

Refusal to handover gold

 If a Vault Manager refuses or fails to hand over the gold, the burden of proof shall lie on the Vault Manager to establish the existence of a lawful excuse for its refusal or failure to allow such withdrawal.

Indemnity

If any loss is caused to the depositor or the beneficial owner by the Vault Manager in the course of providing vaulting Services, the Vault Manager shall indemnify such depositor or beneficial owner in the manner as maybe specified by the Board.

Maintenance of record

The Vault Manager shall maintain records of all transactions or operations pertaining to the recognized vault(s).  The Vault Manager shall maintain the following records and documents-

• Documents to ensure that gold is traceable;
• Details of storage, transfer and withdrawal of gold;
• Purity, quantity and weight of deposited gold;
• Creation and extinguishment of Electronic Gold Receipts;
• Depositors under Know Your Depositor requirement;
• Details of instructions received from and sent to beneficial owners; and
•  All reports submitted to the Board.

The Vault Manager shall inform the Board where the above said records are maintained.  The said records shall be maintained for at least five years.

Disclosure

 The Vault Manager shall clearly disclose all charges related to its services on its website.

Report

The Vault Manager shall 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.