Inadequate KYCs: Sebi lays down rules for deactivation of accounts
Capital markets regulator Sebi on Friday released a framework for automated deactivation of trading and demat accounts of investors in case of inadequate Know Your Client (KYC) details.
The framework will come into effect from August 31, the Securities and Exchange Board of India (Sebi) said in a circular.
Noting that addresses form a critical part of the KYC procedures, Sebi said that every address recorded for the purpose of compliance with the KYC procedures has to be accurate.
An intermediary is required to update the address from time to time. However, the regulator observed that in some cases accurate or updated addresses of clients are not maintained. This is borne out of the fact that when Sebi issues any notices, during the course of any enforcement proceedings on such addresses, the same remains unserved.
Under the rules, market infrastructure institutions (MIIs)– stock exchanges, except commodity derivatives exchanges, and depositories — will have to physically serve Show Cause Notice (SCN) or order issued by the regulator to the concerned entity.
The MIIs will have to forward the signed acknowledgement of its receipt by the concerned addressee or its authorized representative to the regulator within 30 days from the date of receipt of such instructions from the markets watchdog.
If none of the MIIs is able to deliver the SCN or order at any of the addresses mentioned in the KYC records linked to any trading or demat account of the entity; and obtain a signed acknowledgement of its receipt from the entity or its authorized representative, then all MIIs will deactivate all trading and demat accounts within five working days from the last unsuccessful delivery report.
The regulator clarified that if one of the MIIs is able to deliver the SCN or order, as the case may be, to the entity and obtain signed acknowledgement, then none of the accounts of the entity will be deactivated.
Sebi said that pending pay-in and pay-out obligations and open positions may be permitted to be settled, squared off or closed out, while enforcing the deactivation of trading or demat accounts of such entities.
MIIs will have to ensure that they communicate the details of the deactivation along with reasons to the respective registered intermediary.
The concerned entity may place a request to the registered intermediaries seeking re-activation of trading or demat accounts along with the correct proof of address and signed acknowledgement of receipt of the SCN or order.
Sebi said that the process of reactivating the accounts by the MIIs should not exceed more than five working days after receipt of request from the entity along with all the documents. The framework would also apply to joint accounts.
The MIIs may deviate from the new rules in cases where compliance with the framework is hampered due to factors beyond the control of the entity.
In such cases, the MIIs will have to record the reasons for deviating from the mandate of the framework and communicate the same to Sebi within two working days of such deviation.
The new rules are aimed at ensuring that the client furnishes accurate or updated details of address and ensuring that KYC details are correct.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Comments are closed.