Sebi issues new norms for client verification

Sebi issues new norms for client verification

It will be applicable from Jan 2012

To strengthen the regulations governing KYC Registration Agencies, SEBI, on Friday, announced a set of guidelines making it mandatory for all market intermediaries, including brokers and depository participants, to carry out in-person verification of their clients.

“It shall be mandatory for all the intermediaries to carry out in-person verification (IPV) of their clients. The intermediary shall ensure that the details like name of the person doing IPV, his designation, organisation with his signatures and date are recorded on the KYC form at the time of IPV,” the Securities and Exchange Board of India said.

The guidelines come less than a month after SEBI issued regulations allowing wholly-owned subsidiaries of stock exchanges and depositories to act as KYC registration agencies (KRAs). In August, SEBI had simplified the account opening process for investors. It had then issued guidelines for uniform KYC requirements for investors while opening accounts with any intermediary in the securities market.

“The IPV carried out by one SEBI registered intermediary can be relied upon by another intermediary. In case of stock brokers, their sub-brokers or authorised Persons (appointed by the stock brokers after getting approval from the concerned Stock Exchanges) can perform the IPV,” said the guidelines announced on Friday. Further, in case of Mutual Funds their Asset Management Companies (AMCs) and the distributors who comply with the certification process of National Institute of Securities Market (NISM) or Association of Mutual Funds (AMFI) and have undergone the process of Know Your Distributor (KYD), can perform the IPV.

“The KRA system shall be applicable for all new client accounts opened from January 1, 2012,” SEBI said. With regard to intermediaries, the regulator said after doing the initial KYC of new clients, they have to upload the information on the KRA’s system and send the KYC documents within 10 working days from the date of execution.

“In case a client's KYC documents sent by the intermediary to KRA are not complete, the KRA shall inform the same to the intermediary who shall forward the required information/documents promptly to KRA,” it added. For existing clients, the KYC data may be uploaded by the intermediary, provided they are in conformity with details sought in the uniform KYC form. The intermediary also has to ensure that there is no duplication of data in the KRA system.

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