Sebi eases KYC compliance guidelines

New Delhi, May 15 (PTI) Markets regulator Sebi has decided to simplify the risk management framework for validating Know Your Customer (KYC) records through KYC Registration Agencies (KRAs), a move that will ensure ease of transacting for investors, experts said on Wednesday.

Under the new framework, KRAs can now verify PAN, name, address, email, and mobile number from official databases. If these details are found to be in order, they will be considered validated records, Ankit Ratan, Co-founder & CEO, Signzy said.

“The new framework is expected to address challenges faced by many investors while also ensuring the verification of investors’ digital identities. With a growing number of investors embracing digital platforms for investment, verifying digital identities has become increasingly important,” he added.

The exchanges, depositories, and relevant intermediaries are tasked with implementing necessary technical changes in their systems by May-end.

Mutual fund houses, broking firms, and portfolio management service providers will need to implement robust compliance tools and risk management frameworks to safeguard investor data privacy and security. This will help ensure that all investors are onboarded after identity verification.

KRA involves entities such as CAMS KRA, BSE KRA, NSE KRA, among others. These agencies are responsible for maintaining the KYC details of individuals, typically gathering information from brokers, exchanges, and intermediaries.

On Tuesday, Sebi simplified the risk management framework for ease of transacting by clients based on the feedback received from the stakeholders in the securities market. Simplifying the guideline, the regulator has modified the circular issued in October 2023.

In October last year, the verification process underwent an update, invalidating proofs of address such as ration cards, electric bills, or scanned Aadhar cards.

Presently, the mandate requires KRAs to verify certain attributes of client records within two days of receiving the KYC record, including Permanent Account Number (PAN), name, and address.

“Going forward, the client’s records verified by KRAs with official databases (Income Tax Department database on PAN, Aadhaar XML, Digilocker or M-Aadhaar) will be considered ‘validated records’. Individuals with invalid documentation will not be permitted to trade in the securities market,” Feroze Azeez, Deputy CEO of Anand Rathi Wealth, said.

This initiative by Sebi serves to safeguard investor interests in securities and foster the development and regulation of securities markets, representing a significant step forward in consumer protection, he added.

Signzy Ratan said that Sebi’s move will ensure the protection of investor interests in the capital market and promote the development of security markets. It represents a significant step towards enhancing digital trust and creating a secure digital environment for investors.