Securities and Exchange Commission (Security Custodial Services) Rules, 2003

[Updated until 24 August 2021]

Bangladesh Gazette
Extraordinary Number
Published by Authority
Thursday, March 13, 2003
[Part VIII -- Notifications and Notices issued in exchange for private persons and corporations.]

Securities and Exchange Commission

Notification
Date, 24th February 2003
No.-SECI/CMMRCID/2002-104/Admin-15--In exercise of the powers conferred by Section 24(1) of the Securities and Exchange Commission Act, 1993 (1993 Act No. 15), the Securities and Exchange Commission hereby, after previous publication, prescribes the Securities and Exchange Commission (Security Custodial Services) Rules, 2003:

1. Short Title.-
[(1)] These Rules shall be called the Securities and Exchange Commission (Security Custodial Services) Rules, 2003.

[(2) The rules prescribed herein shall be deemed to be directions or orders issued under the Securities and Exchange Commission Act, 1993:
Provided that the Commission may, from time to time, issue any other order or direction under these Rules.]

2. Definitions.- (1) Unless the context or subject matter otherwise requires, in these Rules:- (a) "Act" means the Securities and Exchange Commission Act, 1993 (1993 Act No. 15); (b) "Custody Account" means the account maintained by the Security Custodian regarding the securities transactions of its client; (c) "Client" means any person who has entered into an agreement with a Security Custodian registered under these Rules to receive security custodial services; (d) "Schedule" means the Schedule to these Rules; (e) "Registration Certificate" means the Registration Certificate approved under these Rules; (f) "Inspecting Officer" means the Inspecting Officer appointed by the Commission in accordance with these Rules;

1 Notification No. SECI/CMMRCID/2002-104/Admin-16 dated 9 January 2006 has been inserted, which was published in the Bangladesh Gazette on April 5, 2006.
2 Notification No. SECI/CMMRCID/2002-104/Admin-16 dated 9 January 2006 has been inserted, which was published in the Bangladesh Gazette on April 5, 2006.

(g) "Form" means the Form attached to these Rules; (h) "Person" includes a registered company, incorporated body, partnership firm or any other class of institution with the paid-up capital limit (Paid-up Capital Limit); (i) "Security" means the meaning assigned to it in the Securities and Shares Depository Act, 1969 (Dhaka Act 1969); (j) "Security Custodian" means any person who has obtained a Registration Certificate to provide Security Custodial Services under these Rules; (k) "Depository Act" means the Depository Act, 1999 (1999 Act No. 6); (l) "Securities" means the Securities and Shares Depository Act, 1969 (Dhaka Act 1969).

(2) Words used in these Rules which are not defined in sub-rule (1) shall have the same meaning as assigned to them in the Contract Act, 1872 (Dhaka Act 1872), or the Sale of Goods Act, 1881 (Dhaka Act 1881), or the Partnership Act, 1882 (Dhaka Act 1882), or the Companies Act, 1891 (Dhaka Act 1891), or the Trusts Act, 1938 (Dhaka Act 1938), or the Foreign Exchange Regulation Act, 1947 (Dhaka Act 1947), or the Securities and Shares Depository Act, 1969 (Dhaka Act 1969), or the Foreign Exchange Management Act, 1991 (Dhaka Act 1991), the Securities and Exchange Commission Act, 1993 (1993 Act No. 15), the Non-Government Organization Act, 1993 (1993 Act No. 27) and the Companies Act, 1994 (1994 Act No. 18) along with the rules and regulations framed thereunder.

3. Prohibition on providing Security Custodial Services without Registration Certificate.- No one shall operate any program related to providing Security Custodial Services without a Registration Certificate approved under these Rules.

4. Security Custodial Services.- The following services and all ancillary services related thereto shall be included in Security Custodial Services, namely:- (1) Keeping the client's securities safe; (2) Collecting, accounting for, and informing the client of any interest, dividend, profit (return) or claim against the relevant security which is receivable in favor of the client; (3) Collecting, accounting for, and informing or providing the relevant client with any announcement (announcement) of the security issuer or any information, statement, etc. published or made available to the public by the issuer; (4) Maintaining and managing the accounts of the client's securities and funds.

5. Eligibility for Registration.- Any person shall be eligible for registration as a Security Custodian under these Rules if:- (1) It is a public limited company, scheduled bank (Scheduled Bank), other institution (Other Institution) or incorporated body established for this purpose; (2) It has the necessary official premises, safe vault (Safe Vault), computer system, skilled manpower and other ancillary facilities for providing Security Custodial Services;

(3) It has the necessary manual (Manual) for operating the mentioned program, in which the detailed description of how Security Custodial Services will be operated is included; (4) It has the necessary infrastructure and manpower to operate Security Custodial Services independently; (5) There is no registered report of any investigation based on preliminary investigation regarding any allegation of violation of the Securities Act against any member of its Board of Directors or relevant officials; (6) No member of its Board of Directors is a defaulter of loans; (7) No member of its Board of Directors, Chief Executive Officer or relevant officials have been punished for any criminal or moral offense.

6. Application for Registration.- (1) Any person wishing to operate as a Security Custodian shall make an application to the Commission in Form-A.
(2) Any Security Custodian already operating with the Commission's approval prior to the issuance of these Rules shall make an application to the Commission within one month of the issuance of these Rules and may continue to operate as a Security Custodian under these Rules until the application is disposed of, or until any further direction is given:
Provided that if the application is made repeatedly, the Commission may extend the specified time for reasonable cause.
(3) The application shall be accompanied by the documents and information mentioned in the said Form along with the application fee (non-refundable) mentioned in Schedule-1.
(4) If any institution already operating as a Security Custodian fails to apply for registration within the specified time, it shall not be able to operate as a Security Custodian thereafter; and in that case, it shall be obliged to transfer the securities, accounts, documents, etc. held by it as a Security Custodian to the Commission in accordance with the Commission's directions or take measures as per the directions.

7. Registration.-(1) Upon receipt of an application for registration, if the Commission is satisfied that the application is eligible for approval under these Rules, it shall approve it within thirty working days of receipt, upon receipt of the registration fee mentioned in Schedule-1, and issue a Registration Certificate in Form-B. (2) If further information is required to consider an application for registration, the Commission may request the relevant information within seven days of receiving the said application, and upon receiving the said information within the specified time, if the application is considered acceptable, the Commission shall approve it and issue a Registration Certificate in Form-B. (3) After considering an application for registration, if the Commission concludes that the application is not eligible for approval under these Rules, or that approving it would not be conducive to the capital market and public interest, it may reject the application by stating the reasons in writing within thirty working days of receiving the application, or receiving additional information under sub-rule (2):

Provided that no application shall be rejected under sub-rule (3) without providing a reasonable opportunity of hearing.
(4) Any Registration Certificate issued by the Commission shall remain valid for five years from the date of issue.
(5) If any information provided by the Security Custodian to the Commission changes subsequently, it must immediately inform the Commission in writing.
(6) The Commission may renew a Registration Certificate for another five years if an application is made to the Commission along with the renewal fee mentioned in Schedule-1 one month before the expiry of the certificate's validity.

8. Fees.- (1) The fees mentioned in Schedule-1 for application, registration, renewal, etc., shall be deposited with the Securities and Exchange Commission through a bank draft/pay-order issued by the applicant. (2) The annual fee mentioned in Schedule-1 shall be deposited by December 31st of each year. (3) In case of delay in submitting the application for renewal of the Registration Certificate and depositing the annual fee, the fine mentioned in Schedule-1 for each day of delay shall be deposited with the Commission along with the application for renewal within the current validity period.

9. Code of Conduct.- The Security Custodian shall abide by the Code of Conduct specified in Schedule-2.

10. Internal Audit and Evaluation.- (1) The Security Custodian shall have an internal audit and evaluation system through which, among other things:
(a) It is ensured that safe and suitable services are provided as a Security Custodian at all times; (b) All assets kept in custody, relevant records, documents, etc., are safe and no unauthorized changes are made to them; (c) Each client receives their legally entitled benefits such as dividends, bonus shares, right shares, interest, principal, etc., correctly and on time; and (d) The client's assets and relevant records, documents, etc., are always completely safe from loss, theft, or natural disasters.

(2) The Security Custodian shall have its internal audit and evaluation system examined by an external independent auditor every year and submit a copy of its report to the Commission immediately:
Provided that if the Security Custodian is a bank or other institution, in that case, its external audit report may include a separate audit description and report on this matter; Further provided that if the Commission deems it necessary, it may direct that this matter be examined by a specialist at the Custodian's expense, and in that case, the Security Custodian shall be obliged to take appropriate measures accordingly.

11. Prohibition on Transfer of Work.- The Security Custodian shall not transfer or assign any of its work to anyone else unless directed by the Commission.

1 [12. Separate Custody Account.- The Security Custodian shall maintain a separate custody account and beneficial owner account for each of its clients and shall not mix the assets of one client with those of another client or the Security Custodian's own assets.]

13. Contract with Client.- The Security Custodian shall be bound by a separate contract with each of its clients, which shall include, among other things, the following matters, namely:- (a) It must be stated at the time of each transaction who the beneficial owner of the transaction will be; (b) The circumstances and manner in which the Security Custodian can receive and transfer or assign securities on behalf of its client; (c) The circumstances and manner in which the Security Custodian can receive dividends, interest, principal or other receivables on behalf of its client; (d) The circumstances and manner in which the ownership of securities can be changed; and (e) A detailed description of the insurance of the client's assets (if any).

14. Preservation of Information, Documents, Records, etc.- (1) Without prejudice to the operation of any other existing law, the Security Custodian shall preserve the following information, documents, records, etc., among other things, namely:- (a) Documents related to client identification along with updated and verified information of each client; (b) A detailed description of all securities received, transferred, or assigned on behalf of each client; (c) A detailed description of all receivables credited to each client's account; (d) A detailed description of all securities registered in the name of each client; (e) A detailed description of the amount of local currency received and the amount of foreign currency sent abroad in the name of each client; 2 [(f) Ledger accounts (Ledger Accounts) and beneficial owner accounts (Beneficial Owner Accounts) in the name of each client;] (g) Copies of all reports submitted to the Commission; and (h) Any other information, documents, records, etc. directed by the Commission.

(2) If the Commission so requests, the Security Custodian shall inform the Commission in writing where the information, documents, records, etc. mentioned in sub-rule (1) are or will be preserved. (3) The information, documents, records, etc. mentioned in sub-rule (1) shall be preserved for at least 7 (seven) years.

15. Supply of Information to Commission.- (1) The Security Custodian shall supply to the Commission by the 10th (ten) of each month, the status along with a detailed description of all securities received, transferred, or assigned in the previous month in each client's account, and the details of local currency received domestically or sent abroad regarding security purchases-sales or any other type of transaction (transaction) and transfers based on contract notes in each client's account.

1 Notification No.-SECI/CMMRCID/2006-159/Admin-01/32, dated 16th June 2008 has been substituted, which was published in the Bangladesh Gazette on 20th July 2008.
2 Notification No.-SECI/CMMRCID/2006-159/Admin-01/32, dated 16th June 2008 has been substituted, which was published in the Bangladesh Gazette on 20th July 2008.

(2) In addition to the information mentioned in sub-rule (1), the Security Custodian shall be obliged to supply any information requested by the Commission from time to time as per the Commission's demand.

16. Inspection.- (1) The Commission may, on its own initiative or based on any complaint, appoint one or more persons as Inspecting Officers to examine the files, documents, records, etc. of the Security Custodian. (2) The Commission shall inform the Security Custodian about the inspection seven days in advance by notice (Notice) for the examination mentioned in sub-rule (1). However, if deemed urgent, inspection may be conducted without any notice. (3) In the case of inspection, every director and official of the Security Custodian shall be obliged to provide all documents, files, records, information, etc. as required by the Inspecting Officer and cooperate with the Inspecting Officer in this regard. (4) The Inspecting Officer may, if necessary, take written or oral statements from any director or official of the Security Custodian, and in that case, the relevant director or official of the Security Custodian shall be obliged to provide written or oral statements with their signature.

17. Submission of Inspection Report to Commission.- (1) The Inspecting Officer shall submit the inspection report to the Commission as soon as possible after the inspection ends, or as per the Commission's direction. However, if the Commission orders, the preliminary report may be submitted to the Commission before submitting the final report. (2) If the Commission deems it necessary, it may send the final inspection report or part of it to the Security Custodian and direct the Security Custodian to take appropriate measures accordingly. (3) Upon receiving any direction under sub-rule (2), the Security Custodian shall be obliged to take appropriate measures accordingly.

18. Suspension of Registration Certificate.-(1) The Commission may suspend the Registration Certificate of the Security Custodian for the following reasons, namely:- (a) Violation of any condition or code of conduct of these Rules; (b) Failure to supply information as required by the Commission; (c) Intentionally (intentionally) supplying false information, documents, or records to the Commission; (d) Failure to submit any report or information as per these Rules; (e) Failure to provide necessary cooperation to the Inspecting Officer; (f) Failure to improve the operational procedures (Operational Procedures) of the Custodian as per the directions issued by the Commission; (g) Failure to resolve reasonable complaints of clients; and (h) Failure to deposit the annual fee, or in applicable cases, the application and fee for renewal of the certificate.

(2) For the reasons mentioned in sub-rule (1), the Commission may, if deemed appropriate, impose a monetary penalty instead of suspending the Registration Certificate.

(3) No action shall be taken under these Rules without a statement of reasons (Statement of Reasons) and providing a reasonable opportunity of hearing.

19. Cancellation of Registration Certificate.- (1) If the Security Custodian loses any eligibility applicable for registration, its Registration Certificate shall be deemed immediately invalid. (2) In addition, the Commission may cancel the Registration Certificate of the Security Custodian for the following reasons, namely:- (a) If the violations mentioned in sub-rule (1) of Rule 18 occur multiple times; (b) If the Security Custodian is proven guilty of any fraud (Fraud) or moral lapse offense; (c) If any document or information provided by the Security Custodian to the Commission is proven to be materially false or misleading after the Registration Certificate was approved:
Provided that no action shall be taken under sub-rule (2) without a statement of reasons (Statement of Reasons) and providing a reasonable opportunity of hearing.

1 [19A. Monetary Penalty.- Without prejudice to the provisions of Rules 18 and 19, the Commission may punish the accused person with a monetary penalty under the Act.]

20. Appeal.- If any person is aggrieved by any decision made by the Commission under these Rules, they may appeal to the Commission in accordance with the Securities and Exchange Commission (Appeal) Rules, 1995, and in that case, the appeal shall be disposed of in accordance with the said Rules.

2 [21. Deposit of Fees, etc. in favor of the Commission.- Various types of fees, etc., in favor of the Bangladesh Securities and Exchange Commission may be deposited through pay-order, bank draft, or electronic fund transfer.]

1 Notification No. SECI/CMMRCID/2002-104/Admin-16 dated 9 January 2006 has been inserted, which was published in the Bangladesh Gazette on April 5, 2006.
2 Notification No.-BSECI/CMMRC/2019-392/24/Admin/124, dated 30 June 2021 has been inserted, which was published in the Bangladesh Gazette on August 24, 2021.

Form-A
(See Rule 6)
Application for Registration Certificate as Security Custodian

Instructions:
(a) The application must be filled out and submitted to the Commission along with all necessary documents.
(b) The application will be considered only if it is complete and filled out carefully.
(c) All information must be typed. Any information that needs to be provided in more detail must be attached on separate paper along with this form.
(d) The bank pay-order/draft mentioned in sub-rule (3) of Rule 6 must be submitted with the application.
(e) Every page of the form and every page of all attached papers must be signed by the Chief Executive (Chief Executive) of the applicant.
(f) The Power of Attorney (by the Board of Directors) granted to the person signing this application to sign the application on behalf of the company or incorporated body must be submitted with the application.

1. Applicant's:
   (a) Name-
   (b) Registered Office-
   (c) Address of Principal Office in Bangladesh if foreign- (d) Telephone Number- (e) Telex Number- (f) Fax Number- (g) E-mail

2. The applicant belongs to which of the following categories:
   (a) Public Limited Company established for this purpose (b) Domestic Bank- (c) Foreign Bank- (d) Other Institution- (e) Others-

3. Applicant's:
   (a) Date of registration under the Companies Act or equivalent foreign law (Certified copy of Registration Certificate, Memorandum of Association, and Articles of Association must be attached)- (b) Capital (1) Approved - (2) Issued - (3) Paid-up

(c) If an incorporated body, a copy of the Act must be attached.
(d) If a bank or other institution, a certified copy of the license obtained from the relevant regulatory authority must be attached.

4. A certified copy of the Board's decision to obtain the certificate as Custodian along with the name and address of each promoter/director of the applicant must be submitted.

5. If the applicant is registered with any domestic or foreign regulatory authority (Regulatory Authority), the name and address (if multiple, all must be given) of the regulatory authority with which it is registered, along with a certified copy of the Registration Certificate.

6. If the applicant is listed on any stock exchange, the name, address, and date of listing of the said stock exchange (if multiple, all must be given).

7. A brief description of the business the applicant operates in Bangladesh or abroad.

8. If the applicant was already operating as a Security Custodian in Bangladesh prior to making the application, details of when it started operating as a Custodian, the number and category of current clients, the amount and approximate value (current market price) of securities held in custody, and the status of funds in the relevant client accounts.

9. Details if the applicant is already operating as a Security Custodian anywhere abroad.

10. Description of the applicant's infrastructure:
    (a) Details of the designated location for Custody services- (b) Details of the safe vault- (c) Details of protection against hazards to Custody assets- (d) Details of risk management- (e) Details of ancillary facilities- (f) Others-

11. Detailed information about the manpower employed (or proposed) in Custody services and their qualifications, along with the details of the Chief Official responsible for the Custodial Services Department.

12. Description of how the situation will be managed if the computer system fails.

Declaration
I hereby declare that the information provided in this application, the attached documents, and the information and descriptions mentioned in the additional papers are completely true; And I further declare that if any changes occur in the said information, we will immediately inform the Commission in writing; And I further declare that there are no allegations of violation of the Securities Act against any of our directors, Chief Executive Officer, and officials employed (or proposed) in Custody services, nor have they been punished for any criminal or moral offense, nor is any member of the Board of Directors a loan defaulter; And we further declare that we will abide by the Securities and Exchange Commission (Security Custodial Services) Rules, 2003, laws related to securities, along with policies, orders, and guidelines issued or provided by the Commission from time to time.

For and on behalf of
Date ------------------------
Signature-------------------------
Name---------------------------
Designation-------------------------
(Seal)

Form-B
(See Rule 7)
Registration Certificate of Security Custodian

Registration Certificate Number : .....................................
Date : .....................................

Under the powers conferred by Section 10, sub-section (1) of the Securities and Exchange Commission Act, 1993 (1993 Act No. 15), read with Rule 7 of the Securities and Exchange Commission (Security Custodial Services) Rules, 2003, the Securities and Exchange Commission hereby issues this Registration Certificate to ................................................ (Name of Security Custodian) to operate as a Security Custodian under the said Rules.

The validity of this certificate shall remain in force until .................................Date, unless renewed.

For and on behalf of the Securities and Exchange Commission
Date................................
Signature.......................................
Name..........................................
Designation........................................
(Seal)

1
[Schedule-1
(See Rules 6, 7 and 8)
Fees (ভবব):

1. Application fee for Registration Certificate - 50,000 (Fifty) Thousand Taka.
2. Registration Fee - 5,00,000 (Five) Lakh Taka.
3. Annual Fee/Renewal Fee - 1,00,000 (One) Lakh Taka.
4. Late submission of Registration Certificate Renewal/Annual Fee - 10,000 (Ten) Thousand Taka.
   Fine in case of delay (per day)

1 Notification No.-BSECI/CMMRC/2019-392/24/Admin/124, dated 30 June 2021 has been substituted, which was published in the Bangladesh Gazette on August 24, 2021.

---]

SCHEDULE-2
(See Rule 9)
Code of Conduct:
Securities Custodian

1. It shall maintain the highest degree of care, intelligence, speed, honesty, reputation, efficiency, and trustworthiness in the performance of its duties;
2. It shall, on behalf of its client, distribute or credit to the client's account any dividends, interest, principal, or other income or receipts received or collected, as soon as possible;
3. It shall maintain records of all accounts of its clients (purchase, sale, and transfer, receipt, payment, delivery, etc.) and, if instructed by the client, supply them immediately;
4. It shall maintain the confidentiality of its clients and their assets along with the protection of accounts;
5. In the case of maintaining records through computers, it shall ensure that even if the information stored in the computer is lost, the client is not harmed and all information is available immediately through alternative means;
6. It shall provide necessary cooperation to all stock exchanges, depositories, other custodians, clearing houses, etc., having an interest in securities or the capital market;
7. It shall not conduct or be involved in any activity contrary to the Securities and Exchange Commission Act, 1969, the Securities and Exchange Commission Act, 1993, the Depository Act, 1999, and the rules, regulations, orders, directives, or notifications issued thereunder.
   On behalf of the Securities and Exchange Commission:
   Monir Uddin Ahmed
   Chairman