**Executive Summary**
This document summarizes the responses to stakeholder and public comments on the proposed amendments to the Pension Fund Regulatory and Development Authority (PFRDA) (Central Recordkeeping Agency) (CRA) Regulations, 2015. The amended regulations were notified in the Gazette of India on February 9, 2024. The document addresses concerns regarding the definition of the Principal Officer, eligibility criteria, changes in CRA status, compliance certificate submissions, commencement certificates, fraud prevention, and other key areas.
**Key Points / Main Content**
* **Definition of Principal Officer:**
* The concept of Principal Officer has been subsumed under the Key Management Personnel (KMP) definition.
* **Eligibility Criteria:**
* The requirement regarding prior convictions has been maintained as a part of the fit and proper person criteria.
* **Change in Status or Constitution of CRA:**
* Changes in regulation have been incorporated with an explanation on what constitutes a change.
* Prior approval for changes in shareholding patterns may not be feasible for listed entities; post-facto intimation may be provided.
* **Annual Compliance Certificate:**
* The time period allowed for submission of the annual compliance certificate has been extended to 60 days.
* **Certificate of Commencement of Business:**
* The timeline for obtaining a Certificate of Commencement of Business has been extended to 12 months from the date of business commencement.
* **Fraud Prevention and Mitigation Policy:**
* The policy will be developed in consonance with the requirements of existing regulations and guidelines, ensuring adequate prevention measures, indemnification, and restitution. These provisions will be incorporated in all intermediary regulations.
* **Service Fees or Charges:**
* Adequate stakeholder consultation may be done when setting up the process of price discovery.
* **Separation of NPS Activities:**
* Adequate provisions for internal controls have been specified in the regulations.
* **Annual Report Submission:**
* The annual report of the CRA should include an audit of processes, operations, and accounts covered under the PFRDA Act, performed by a statutory auditor, with timelines as per the Companies Act, 2013.
* **Debarment of Key Personnel:**
* The measure is to strengthen corporate governance by potentially debarring individuals.
**Impact Analysis**
**Stakeholder:** CRAs (Central Recordkeeping Agencies)
**Impact:** CRAs must comply with the revised regulations, particularly regarding the definition of KMPs, obtaining necessary certifications, and adhering to fraud prevention guidelines.
**Action Required:** CRAs need to review and update their internal policies and procedures to align with the amended PFRDA regulations, especially concerning the roles and responsibilities of KMPs and reporting timelines.
**Stakeholder:** Subscribers
**Impact:** Subscribers will benefit from strengthened fraud prevention measures and potentially, a more structured framework for grievance redressal.
**Action Required:** No direct action required from subscribers, but they should be aware of the protections and processes provided by the CRA Regulations.
**Stakeholder:** Pension Fund Regulatory and Development Authority (PFRDA)
**Impact:** PFRDA is responsible for overseeing the implementation of the amended regulations and ensuring compliance by CRAs.
**Action Required:** PFRDA needs to monitor CRA activities to ensure compliance and may need to provide further guidance or clarification on specific aspects of the regulations.
Key Entities Referenced
PFRDA (CRA) Regulations, 2015: The original regulations being amended.
Pension Fund Regulatory and Development Authority: Regulatory authority responsible for these regulations and the NPS.
Central Recordkeeping Agency: Entity regulated by these regulations and responsible for maintaining records for the National Pension System.
Pension Fund Regulatory and Development Authority (Central Recordkeeping Agency) (Amendment) Regulations, 2023: The new amendment regulations being discussed.
PFRDA Act: The Act under which the pension schemes are covered.
Response to Stakeholder / Public comments on the proposed amendments to PFRDA (CRA) Regulations, 2015
[The Pension Fund Regulatory and Development Authority (Central Recordkeeping Agency) (Amendment) Regulations, 2023 have been notified in the
Gazette of India on 09.02.2024]
S. Response to stakeholder /
Subject Matter Stakeholder / Public comments
No. public comments
1 Definition of Principal a. Is the KMP in addition to the Principal Officer or is it a replacement of The concept of principal officer
Officer the Principal Officer. As principal officer act as a SPOC person has been subsumed under the
between the Authority and CRA. Though Compliance Officer is in KMP definition.
position and is responsible for compliance from the regulatory
perspective.
b. Whether the concept of Principal Officer remain in CRA? More
clarification is required w.r.t. how Key Personnel replace the Principal
Officer.
2 Eligibility criteria The point i) may be rephrased. It is the requirement of fit and
“i) The Applicant has not proper person criteria.
been convicted by any court
for offence and a period of
five years has not elapsed
from the date of such
conviction”
Page 1 of 5Response to Stakeholder / Public comments on the proposed amendments to PFRDA (CRA) Regulations, 2015
3 Explanation to Change in a. Prior approval for change of share holding pattern may not be feasible Proposed changes in regulation
Status or Constitution of in case of listed entity, intimation can be provided post-facto. have been suitably incorporated
CRA b. Prior Approval for change in the shareholding pattern point should be and an explanation to what shall
considered if the entity is listed on stock exchanges constitute change in the status
c. of constitution has been
specified.
4 Submission of an annual Can this 30 days’ time period be extended enabling the company to place Proposed changes in regulation
compliance certificate in it before the board and get the same approved by them, if the entities are have been suitably redrafted.
respect of fulfilling eligibility listed entity The time period allowed for
conditions and submission submission of compliance is 60
of such certificate post days.
placing it before the board
of CRA.
5 Certificate of a. Certificate of Commencement of business needs to be obtained within Proposed changes in regulation
Commencement of 6 months from the grant of certificate of registration while confirming have been suitably redrafted.
Business simultaneously that CRA has CMMI level III certificate. Whereas it The timeline has been extended
requires approx. 12 months to obtain CMMI level III certification. to 12 months from the date of
b. CMMI level 3 certification is for a working organisation to improve their certificate of commencement of
processes. Further, the certification is for the CRA / NPS activities and business.
functions. Completion of CMMI L3 certification may not be possible at
the time of applying for Certificate of commencement when the
Company has not commenced its NPS operations.
Page 2 of 5Response to Stakeholder / Public comments on the proposed amendments to PFRDA (CRA) Regulations, 2015
6 Fraud prevention and a. The Risk management policy will be comprehensive and the loss to be The policy to be developed by
mitigation policy indemnified, if any, has to be limited to actuals and to the extent of loss CRA has to be in consonance
caused on account of lapse on the part of CRA directors, officers and with the requirement of
agents. Further, CRA shall take all such necessary actions to prevent regulations, guidelines, circulars
losses, whether monetary or otherwise including recovery of actual etc and in the interest of
losses resulting from fraudulent or corrupt activity by its employees, subscribers, such that adequate
directors, officers and agents using all means at its disposal, including prevention measures are laid
civil or criminal legal action. However, if any fraudulent act has been down coupled with provision for
committed by other entities, CRA would not be responsible for initiating indemnification and restitution.
action for recovery of losses caused to the subscriber in such incident. These provisions have been
b. To indemnify the subscriber for any loss on account of any failure on incorporated in all intermediary
CRA’s part it’s a very open-ended statement, its parameters can be regulations.
defined for the same
c. The indemnity should be capped at actual loss and there should not
be any claim for indirect losses.
7 Service fees or charges Request the Authority that the existing industry participants be consulted Adequate stakeholder
before setting up the process of price discovery. consultation may be done
8 Separation of NPS a. At present, CRA has a separate vertical, for maintenance of accounts, CRA is a critical/important
activities, accounts, assets income, expenditure, flow of funds, records, data and regulated assets intermediary under NPS
and financials from the in respect of the National Pension System. Systems and business architecture. Adequate
other business activities of operations teams are also dedicated. However, for economies of scale provisions for internal controls
CRA. the finance, HR, logistics etc. are common within organization. have been specified in the
regulations.
Page 3 of 5Response to Stakeholder / Public comments on the proposed amendments to PFRDA (CRA) Regulations, 2015
b. Ring fence terminology needs more clarity. At places in the verticals
separate flow of funds, data, and assets can be regulated and
segregated from other business verticals, however at times there will
be shared human and technological resources
c. The term ‘ring fence’ may be defined. The technology resource like
hardware may be dedicated for CRA, but personnel may be shared
resources across the organisation.
9 Submission of Annual a. MCA timelines with regard to reporting (as per Companies Act) can be Annual report of CRA shall
Report adopted. contain audit of process,
b. We could have an Audit format for the same defining the parameters operations and accounts of
for the audit, whether it should be statutory auditor, or any auditor pension schemes covered
would do In point (b) request clarification in regards to the annual under the PFRDA Act. The
report, as the company every year places before the board the Annual above referred audit shall be
report inclusive of the financial statements and audit report as per the performed by the statutory
Companies Act 2013. Does the PFRDA requires any specific extract auditor. The timeline for
from the aforesaid audit report to be included in annual report submission of the same shall be
c. Audit to be performed by any Auditor or Statutory Auditor is to be as per the Companies Act,
clarified. The scope of audit should be defined to enable the auditor. 2013.
Can Internal Auditor provide the same in his report for the last quarter?
Defined timeline of 60 days maybe relooked and made 90 days.
10 Debarment of Key Key personal will be wider scope of individuals to debar each one of them The measure is to strengthen
Personnel corporate governance.
Page 4 of 5Response to Stakeholder / Public comments on the proposed amendments to PFRDA (CRA) Regulations, 2015
“debarring a key personnel
of the noticee from being
employed or associated
with any intermediary or any
other person for the period
provided in the order;”
"Note: The information and statements provided in the above document are tentative, all concerned are advised to refer to the amendment to regulations
notified in the Official Gazette, for further guidance on the matter."
Page 5 of 5