Sebi norms for biz outsourcing

Jan 19, 2011 |

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Jan. 19: Market regulator Sebi plans to frame new rules for outsourcing of business by brokers, mutual funds, portfolio managers and other market entities and has asked stakeholders to submit their views on functions that can be outsourced and other modalities by February 5. However, it has indicated that market players will not be allowed to outsource core business activities like customer verification and resolution of investor grievances.

Although some market entities already outsource some of their work to third parties, there are no formal guidelines on the businesses that can be outsourced and other terms and conditions for such outsourcing.

Activities currently being outsourced by market entities include data entry, record-keeping, despatch, front-desk customer services and KYC verification.

Noting that outsourcing of key activities will deter the regulation process, Sebi said: “Key activities which are crucial to the intermediation service may be delivered by the intermediary itself.” “The informal feedback indicates that the compliance with securities laws, investor grievance redressal and KYC must not be outsourced under any circumstance,” it said.

“The risks can be grouped into three broad categories: operational, reputational and legal risks,” the regulator said. Listing out nine principles for outsourcing activities, it said the board of the intermediary will need to take responsibility for its outsourcing policy.

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