TaxTMI 
TaxTMI 
Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery
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....n) (Stock Exchanges and Clearing Corporations) Regulations, 2018 ("SECC Regulations") provides, inter-alia, that every recognized Clearing Corporation (hereinafter referred to as "CCs") providing clearing and settlement services for commodity derivatives shall ensure guarantee for settlement of trades including good delivery. To fulfil this obligation, it is imperative on the part of the Clearing Corporations to ensure that their accredited storage facilities exercise due diligence for safety and quality of the goods deposited with them for the purpose of delivery on exchange platform. 2. It is, therefore, incumbent upon the Clearing Corporations to put in place a comprehensive framework of norms for adherence by the Warehouse Service Providers (hereinafter referred to as "WSP/s"), assayers and other allied service providers engaged by them for ensuring good delivery as mandated under the SECC Regulations. 3. At the outset, it is clarified that the norms prescribed in this Circular are the minimum requirements/standards which the Clearing Corporation will set out for compliance by its accredited WSPs and assayers and are to be complied with in conjunction with the applicable ....
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....regulations. 10. This Circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 11. This circular is available on SEBI website at www.sebi.gov.in under the category "Circulars" and "Info for Commodity Derivatives". Yours faithfully, Naveen Sharma General Manager Division of Market Policy Commodity Derivatives Market Regulation Department Email: [email protected] Annexure 1. Accreditation of Warehouse Service Provider (WSP) 1.1. For accreditation of WSPs, the Clearing Corporation shall publish open advertisements in leading newspapers and/or put up the same on their website and follow transparent selection process thereafter. The selection process to be followed for such accreditation shall be displayed on the website of the Clearing Corporation before the process begins. The Clearing Corporation shall ensure that the applications of the WSPs are processed within a stipulated time frame. Note: For the purpose of this Circula....
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....es. 2.4. However, the Clearing Corporation in its discretion, may relax the norm of 3 years stated in Para 2.3 above, provided that the WSP or its promoter/promoter group: 2.4.1. Meets all other criteria 2.4.2. Submit an undertaking that they shall comply with any additional norm that may be specified by the Clearing Corporations within the time frame as may be specified by the Clearing Corporations or meet 3 years' criterion whichever is earlier. 2.5. WSP / Promoters / Promoter Group of WSP shall have no record of serious violation of law of land including that of laws governing warehousing / securities markets; or being expelled by any Clearing Corporation/stock exchange in last three years. The Clearing Corporation can take an appropriate undertaking from the WSP in this regard. 3. Financial Soundness of the WSP 3.1. Share Capital 3.1.1. The Clearing Corporation shall ensure that an accredited WSP shall have subscribed and paid-up share capital of at least Rs. 10 crores. 3.2. Net-worth 3.2.1. An accredited WSP shall meet the following net-worth criteria: - Table 1: Net worth Requirement Type of Goods Number &n....
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.... 3.3.1. The Clearing Corporation shall ensure that the accredited WSP has furnished a refundable security deposit wherein: 3.3.1.1. Such security deposit shall be a minimum amount of Rs. 50 lakhs. 3.3.1.2. Such security deposit shall be in the form of Cash / Bank Fixed Deposits / Bank Guarantee. 3.3.2. Security deposit shall not be released until six months after cancellation or surrender of the accreditation of the WSP or until after satisfaction of every claim against the deposit, whichever is later. 3.4. Financial Security Deposits (FSD) 3.4.1. The WSP shall furnish refundable FSD for all goods on incremental basis in addition to the security deposit as under: - Table 2: FSD Requirement Type of Goods Value of Goods stored Minimum FSD Agricultural/Agriprocessed Up to Rs.250 crores 2% of the aggregate value of stored commodities Between Rs. 250 crores and Rs.500 crores Rs. 5 crores + 3% of aggregate value of stored commodities exceeding Rs. 250 crores Above Rs. 500 crores Rs. 12.5 crores + 4% of the aggregate value of stored commodities exceeding Rs. 500 crores Base / I....
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....ctive Clearing Corporations as per the following formats. Clearing Corporations shall inform the changes, if any, with respect to accreditation status of these warehouses, to enable WDRA to provide the required information as above. WDRA shall also inform Clearing Corporations of any changes, if any, in the security deposit placed by such warehouses/WSPs with WDRA. Table 5: Details of Bank Guarantee Sr. No. Name of WSP BG Number Bank Name Branch Name Date of Issuance (DD/MM/YYYY) Maturity Date (DD/MM/Y YYY) Claim Date (DD/MM /YYYY) Amount Table 6: Details of Fixed Deposit Receipt Sr. No. Name of WSP FDR Number Bank Name Branch Name Date of Issuance (DD/MM/Y YYY) Maturity Date (DD/MM/Y YYY) Amount 3.6.2. Clearing Corporations shall continue to compute FSD requirement as stipulated in Para 3.4 above. The deposi....
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....iness operations and warehousing in general have adequate knowledge of, and experience in generally accepted warehousing and handling practices for goods for which they are accredited. The Clearing Corporation shall also ensure that the KMP of WSP are competent and willing to operate such a storage facility and do not have any conflict of interest in discharge of their functions. 5.1.3. The stock exchanges shall ensure that the following entities, are not allowed, either directly or indirectly, to trade in the commodity derivatives segment of the concerned stock exchange in the commodity for which it is accredited by the Clearing Corporation: 5.1.3.1. WSP 5.1.3.2. Management of WSP (defined as 'key managerial personnel' including whole time directors of WSP and their 'relatives' as per Companies Act, 2013) 5.1.3.3. entities owned or controlled by promoters/management of WSP/Group concerns/associates directly or indirectly or persons 'acting in concert' 5.1.4. However, based on risk assessment, the stock exchanges may provide exemptions to requirement stated in Para 5.1.3 above in the following manner: 5.1.4.1. entities stated in Para 5.1.3 ....
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....monitoring the compliance with relevant Act, byelaws, rules and regulations, notifications, guidelines and instructions issued by relevant authorities from time to time. 5.2.2. The compliance officer would be responsible for ensuring that all applicable norms are followed by the WSP and should issue a declaration to that effect to the Clearing Corporations, at regular intervals as directed by the Clearing Corporation. 6. Know Your Depositor 6.1. The Clearing Corporation shall ensure that the WSP complies with Know Your Depositor (KYD) Policy as prescribed by the Clearing Corporation from time to time. 6.2. The Clearing Corporation shall ensure that they and the WSP shall, at any point of time, be able to identify the depositor of the goods deposited in registered warehouses, and the actual beneficiary (in case the depositor and the beneficiary are different) of the deposited/stored commodities. 7. PAN requirement 7.1. The Clearing Corporation shall ensure that the WSPs are under obligation to provide to it the details including PAN numbers of its Promoters, Promoter group entities, its holding/subsidiaries/associates and other related entities, persons....
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....ng order, as may be prescribed by the Clearing Corporation, for the proper storage and preservation of quality of goods; 8.1.2.9. Each storage facility has adequate infrastructure for storing the deliverable commodities of commodity derivative contracts which needs to be piled properly in a separate storage area as specified by the Clearing Corporation thereby providing clear-cut demarcation between Exchange / non- Exchange commodities; 8.1.2.10. All its storage facilities are free from materials and substances that may adversely affect the quality of stored commodities; 8.1.2.11. All its storage facilities to have adequate security as prescribed by the Clearing Corporation for protection of stored or handled commodities to prevent from tampering or adulteration; 8.1.2.12. All its storage facilities to assign a separate place to store the samples used for inspection / testing for further examination / testing. 8.1.2.13. Shall uniformly follow the SOP developed by the Clearing Corporations with respect to the maintenance, preservation and retrieval of data/records/books of accounts. 8.1.3. Clearing Corporations shall ensure that the WSP have adequate in....
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.... Para 8.1 above: 8.2.1.1. The walls, the floor and the roof do not permit water seepage and there is no source of any insect infestation. 8.2.1.2. has a fully fenced perimeter/boundary. 8.2.1.3. are free from materials and substances that may adversely affect the quality of stored commodities; 8.2.1.4. has its own or has access to fumigation facilities/agencies for pest control activities. 8.2.1.5. has assaying/testing facilities for the commodities it intends to render warehousing facility for, or shall undertake to be associated with an assaying/testing agency which may preferably be certified by one or more national/international agencies like NABL (National Accreditation Board for Calibration and Testing Laboratories), BIS etc., as specified by the Clearing Corporation. 8.2.2. WSPs shall take utmost care on daily basis for keeping surroundings for their respective warehouses under vegetation control and for disposal of waste which can otherwise create a favorable habitat for rodents and other pests. WSP should regularly inspect and verify whether rodent control structures in the warehouse are sound and whether there are any pools of water around the faci....
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....ds, Procedure for verification of commodity and communication to depositors, 9.2.2.4. Procedure for depositing and identifying the Exchange related goods, 9.2.2.5. Procedure for maintaining the quality of the goods stored as per the exchange contract specification, 9.2.2.6. Procedure for Know your depositor requirements, 9.2.2.7. Security policy for ensuring the safety of the goods from theft, burglary etc., 9.2.2.8. Procedure and guidelines for scientific storage of goods, including stacking etc., 9.2.2.9. Procedure for losses caused due to theft, fire, burglary, fraud, negligence and force majeure events, 9.2.2.10. Procedure for internal verification of stock, 9.2.2.11. Preservations of Stock - maintenance of godown hygiene, maintenance of warehouse structure, aeration, periodical examination of goods, classification of presence of insects, premonsoon precautions etc. 9.2.2.12. Selection of Location for offering warehousing services 9.2.2.13. Grievance redressal procedures 9.2.2.14. Role and responsibilities of employees (including outsourced employees) 9.2.2.15. Model warehouse agreement format 9.2.2.16. Maintenance of surroundings, i....
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....s at various locations across India. In addition to the empanelment of assayers for deployment by the WSPs at their warehouses, the Clearing Corporation shall also identify and empanel separate independent assayer(s) where the market participants can get their goods/commodities assayed independently, at the time of depositing into or withdrawing such commodities/goods from a warehouse. However, if the original empanelled assayers engaged by WSP at a delivery centre happen to be Government assayer, then the need for empaneling an additional independent assayer may be dispended with. 11.3. The Clearing Corporation shall ensure that the empaneled assayers work independently, and their operations are governed by Standard Operating Procedures (SOPs) prescribed by the Clearing Corporation. The assayers shall be preferably certified by one or more national/international agencies like NABL (National Accreditation Board for calibration and testing Laboratories), BIS etc., and shall have the facilities as laid down by the Clearing Corporation from time to time. 12. Warehouses at delivery centres 12.1. The Clearing Corporation shall have at least one storage facility at each of the d....
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....facility. However, in case there are NIL stocks in an accredited storage facility during preceding six months, the Clearing Corporations would be exempted from requirement of inspection by independent agency. 15.2.3. Additionally, the audit may also be conducted on risk profiling, as identified by the Clearing Corporations. For this purpose, the Clearing Corporation shall form a panel of independent expert agencies and the cost of such audit shall be borne by the respective Clearing Corporations. 15.2.4. The panel of such independent expert agencies for carrying out inspection of warehouses, shall also be reviewed by the Clearing Corporations from time to time. 15.2.5. The Clearing Corporation shall have a policy of rotation of such independent expert agencies for carrying out inspection after every 3 years with a provision for 'cooling off' period of 1 year. 15.2.6. In addition, the Clearing Corporations shall also conduct in-house physical audit of accredited storage facilities at regular intervals. 15.2.7. The audit report conducted by independent expert agencies shall be displayed on the website of the Clearing Corporation within 15 days aft....
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....s and the Clearing Corporations after verification and satisfaction of need for such request, shall forward the same to the concerned WSP for allowing such inspection to be completed within a stipulated timeframe. 15.4.3. Upon receipt of such advice from the Clearing Corporations, the WSP shall allow the holder/its authorized representatives holding eNWRs or any other electronic receipts/credit balances to do physical inspection of their goods. 15.5. Physical reconciliation of goods 15.5.1. The Clearing Corporation shall put in place adequate procedures to ensure that the physical counting of goods and their reconciliation with the corresponding electronic records is done on fortnightly basis by its WSPs. 15.5.2. The Clearing Corporation shall submit report to SEBI of details of discrepancy observed during the physical reconciliation of goods along with reasons and action taken thereof, on a quarterly basis. Only in extreme cases, in the judgement of the Clearing Corporation, SEBI may be informed of the discrepancy observed on immediate basis. 15.6. Review of WSPs / warehouses 15.6.1. The Clearing Corporation shall review and ap....
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....posit of goods for delivery on the exchange platform along with the policy for deposit of such goods. The market participants willing to deposit goods in accredited warehouses shall submit a request to the WSP in accordance with the policy put in place by the Clearing Corporation for deposit of goods. The WSP shall intimate the depositing participant about the logistic details such as the time, place and storage facility where the goods can be deposited by them. The WSP shall accept the goods for deposits for all such confirmed deposit requests in accordance with the policy put in place by the Clearing Corporation for deposit of goods. 19.Surrender/Cancellation of accreditation 19.1. The WSP may apply for surrender of its accreditation by submitting the Application for Surrender to the concerned Clearing Corporation for evaluation and approval. 19.2. The Clearing Corporation may cancel the accreditation of a WSP if it fails to comply with the provisions of the rules/regulations specified by it and intimate the same to the market participants through Circular. Further, the Clearing Corporations shall put in place a cancellation policy for WSP in public domain. H....
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....nce, revoke the accreditation of the concerned warehouse or/and hold the WSP accountable for any legal liabilities, if the concerned erring WSP/ warehouse engages in any of the following offences: 21.1.1. refuses to accept delivery without any bonafide reasons or, issues a falsified certificate of delivery; 21.1.2. violates any of the Clearing Corporation's rules or limits the movement of a deliverable commodity into or out of the warehouse; 21.1.3. discloses any confidential business information relating to a buyer or seller of a commodity derivative contract; 21.1.4. provide inaccurate or incomplete information to Clearing Corporation, conceal the truth of the facts; 21.1.5. engages in the commodity derivatives trading activities; or 21.1.6. any other offence not listed above. However, the above actions may be initiated only after taking due approval from the relevant committee of Board of the Clearing Corporation in terms of the SECC Regulations, 2018. 21.2. The accredited WSP shall be liable for any losses resulting from any action or inaction on its part or on the part of its warehouses that prevents the buyer or seller fro....