If cost efficiency is the mantra of the modern business, outsourcing is the name of the game. The flip side of ‘outsourcing’, however, is a cause for concern. Not surprisingly, the Securities and Exchange Board of India (SEBI) has decided to hold the whip to reign in market intermediaries who outsource certain of their jobs. Keen to ensure that the intermediaries don’t court assorted risks associated with outsourcing, the regulator is also out to fix responsibility for any outsourcing-related negative fall-outs. It has now come out with norms for outsourcing activities by the intermediaries.
For one, the regulator has made it clear that intermediaries shall not outsource their core business activities and compliance functions. It has gone on to list certain businesses which shall not be outsourced. It has also directed the intermediaries to report ‘suspicious transactions’ in respect of activities carried out by third parties to the financial intelligence unit or any other competent authority. Also, it has instructed the intermediaries to do a self-assessment of their current outsourcing pacts and bring it in alignment with the new norms within six months.
Among other things, the norms require the intermediaries.
To have a comprehensive policy on outsourcing.
To make their boards responsible for such a policy.
To put in place a outsourcing risk management programme.
To ensure that outsourcing does not diminish their ability to fulfil their obligations to customers and regulators.
To ensure that outsourcing does not impede effective supervision by the regulators.
To do right due diligence in selecting the third part and monitoring its performance.
To ensure that such outsourcing relationship are defined by written contracts.
To ensure that confidential information is protected.
Source:http://www.thehindu.com/business/markets/article2717963.ece
