Executive Summary:
This circular, issued by SEBI on April 6, 2022, provides additional guidelines for the implementation of the amended SEBI KYC Registration Agency (KRA) Regulations, 2011. It outlines the responsibilities of KRAs in validating KYC records, assigning KRA identifiers, and integrating systems with Registered Intermediaries (RIs). The validation of all KYC records, new and existing, will commence from July 01, 2022, with specific timelines for Aadhaar-based validations.
Key Points / Main Content:
KRA Responsibilities:
* KRAs will act as repositories of KYC data, responsible for storing, safeguarding, and retrieving KYC documents.
* KRAs must validate KYC records of clients using Aadhaar as an OVD independently.
* KRAs will validate Aadhaar, mobile number/email ID (if not seeded with Aadhaar), and PAN details.
* KRAs must develop uniform internal guidelines for KYC validation in consultation with SEBI and in coordination with each other.
* KRAs must inform RIs of any deficiencies in clients' KYC documents.
* KRAs must assign a unique KRA identifier upon successful KYC validation.
System Integration and Timelines:
* Systems of RIs and KRAs must be integrated for seamless movement of KYC documents.
* New clients' KYC records using Aadhaar as OVD must be validated within 2 days of receipt.
* Existing clients' KYC records using Aadhaar as OVD must be validated within 180 days from July 01, 2022.
* KRA identifier must be intimated to the client within 2 working days of receipt of KYC records.
Client Transactions and Non-Aadhaar KYC:
* Clients with invalid KYC records can transact only after KYC validation.
* KYC based on non-Aadhaar OVD will only be stored and not validated unless Aadhaar is provided.
* Validation of all KYC records (new and existing) commences from July 01, 2022.
Impact Analysis:
SEBI Registered Intermediaries (KRAs, Stock Brokers, DPs, MFs, AMCs, PMs, CIS, Investment Advisors, RTAs, Custodians, AIFs, AMFI):
* Impact: RIs must integrate their systems with KRAs for seamless KYC document transfer. They need to be aware of the new validation requirements and timelines for KYC records. RIs should expect to receive notifications from KRAs regarding deficiencies in client KYC documents.
* Action Required: Integrate systems with KRAs. Update internal procedures to align with the new KYC validation guidelines. Ensure compliance with the specified timelines for validating existing KYC records.
Clients:
* Impact: Clients will receive a KRA identifier after successful KYC validation, which can be used across intermediaries. Clients with invalid KYC records may face restrictions on transactions until validation.
* Action Required: Provide Aadhaar details for KYC if not already provided. Monitor communication from KRAs and RIs regarding KYC validation status.
KRAs:
* Impact: KRAs bear the primary responsibility for implementing the new validation procedures, integrating systems, and meeting the specified timelines.
* Action Required: Develop and implement systems for Aadhaar-based KYC validation. Integrate with UIDAI and Income Tax Database. Coordinate with other KRAs to develop uniform guidelines. Validate all KYC records as per the defined timelines.
Key Entities Referenced
SEBI KYC Know Your Client Registration Agency Regulations, 2011: A set of regulations established by SEBI (Securities and Exchange Board of India) governing the KYC (Know Your Client) registration process through KYC Registration Agencies (KRAs).
KYC Registration Agencies KRAs: Entities registered with SEBI that maintain and validate KYC data for clients in the securities market.
Securities and Exchange Board of India SEBI: The regulatory authority for the securities market in India.
Aadhaar: A 12-digit unique identity number issued to all Indian residents based on their biometric and demographic data.
Unique Identification Authority of India UIDAI: The authority responsible for issuing Aadhaar numbers and managing the Aadhaar database.
Income Tax Database: A database maintained by the Income Tax Department of India, used for verifying PAN (Permanent Account Number).
Stock Exchanges: Organizations that provide a platform for trading in securities.
Registrar and Transfer Agents: Entities which handle investor communications and record-keeping for companies.
CIRCULAR
SEBI/HO/MIRSD/DoP/P/CIR/2022/46 April 06, 2022
To,
SEBI Registered Intermediaries:
1. KYC Registration Agencies (KRAs),
2. Stock Brokers through Stock Exchanges,
3. Depository Participants (DPs) through Depositories,
4. Mutual Funds (MFs) and AMCs
5. Portfolio Managers (PMs)
6. Collective Investment Schemes (CIS),
7. Investment advisors
8. Registrar and Transfer Agents
9.Custodians
10.Alternate Investment Funds (AIFs)
11.Association of Mutual Funds in India (AMFI)
Dear Sir/Madam,
Subject: Guidelines in pursuance of amendment to SEBI KYC (Know Your
client) Registration Agency (KRA) Regulations, 2011
SEBI vide its circular MIRSD/Cir- 26 /2011 dated December 23,2011 had issued
guidelines to implement the SEBI {KYC Registration Agency (KRA)} Regulations,
2011. SEBI KRA Regulations, 2011, has been amended on January 28,2022 vide
a Gazette Notification No. SEBI/LAD-NRO/GN/2022/72 (Annexure A). With a view
to implement the regulations effectively, the following additional guidelines are
being issued:
1. KRAs shall continue to act as repository of KYC data in the securities market
and shall be responsible for storing, safeguarding and retrieving the KYC
documents and submit to the Board or any other statutory authority as and
when required.
2. KRAs shall independently validate records of those clients (existing as well as
new) whose KYC has been completed using Aadhaar as an OVD. The records
of those clients who have completed KYC using non-Aadhaar OVD shall be
validated only upon receiving the Aadhaar Number.
3. During the process of validation, KRAs shall validate the following details:
a. Aadhaar through Unique Identification Authority of India (UIDAI)
authentication/verification mechanism.
b. Mobile number and e-mail ID using OTP validation (only in cases where
mobile number and e-mail ID provided by client are not seeded with
Aadhaar)
c. PAN using the Income Tax Database.4. The KRAs shall develop systems/mechanism, in consultation with SEBI and in
co-ordination with each other, and shall follow uniform internal guidelines
detailing aspects of identification of KYC attributes and procedures for KYC
validation.
5. The systems of Registered Intermediaries (RIs) and the KRAs shall be
integrated to facilitate seamless movement of KYC documents to and from the
RIs to the KRAs.
6. KRAs shall promptly inform the respective RIs of deficiency/inadequacy in
client’s KYC documents, if any, that is observed for validation.
7. On successful completion of KYC validation, a unique client identifier called
KRA identifier shall be assigned by KRA to the client and such KRA identifier
may be used by the client for opening of account with any other intermediary,
without repeating the KYC process.
8. The KYC records of new clients (who have used Aadhaar as an OVD) shall be
validated within 2 days of receipt of KYC records by KRAs.
9. KYC records of all existing clients (who have used Aadhaar as an OVD) shall
be validated within a period of 180 days from July 01, 2022.
10. KRA shall intimate the KRA identifier to the client within 2 working days of
receipt of KYC records by the KRAs by post or email and maintain the proof of
dispatch.
11. Clients whose KYC records are not found to be valid by KRA after the validation
process shall be allowed to transact in securities market only after their KYC is
validated.
12. In case of KYC based on non-Aadhaar OVD, the KRA shall only store such
records and the same would not be validated by KRAs unless Aadhaar number
is provided by the client.
13. The validation of all KYC records (new and existing) shall commence from July
01, 2022.
14. This circular is issued in exercise of powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992 and Regulation 17 of the
SEBI (KYC (Know Your Client) Registration Agency) Regulations, 2011 to
protect the interests of investors in securities and to promote the development
of, and to regulate the securities markets.
Yours faithfully,
Narendra Rawat
General Manager
Market Intermediaries Regulation and Supervision Department
Tel. no.:022 2644 9383
email id: narendrar@sebi.gov.in