SEBI guidelines amend SEBI KRA Regulations, 2011

Prabhat Nigam

13 Sep, 2022

The Securities and Exchange Board of India (SEBI) vide its circular in December, 2011 had issued guidelines to implement SEBI KYC (Know Your Customer) Registration Agency (KRA) Regulations, 2011. These SEBI KRA regulations have been amended vide Gazette Notification on 8^th January, 2022. These amendments have been introduced to implement the regulations effectively.        

What are KRAs? 

KYC Registration Agency (KRA) is actually an agency that is registered with the Securities and Exchange Board of India. KRAs are registered under [KYC (Know Your Customer) Registration Agency] Regulations, 2011. The purpose of KRAs is to maintain the KYC records of the investors centrally, on behalf of the capital market intermediaries registered so that seamless transfer of KYC data takes place between the registered market intermediaries whenever a person goes to open an account with another market intermediary and the customer does not go through again the KYC process all over again.

Applicability of SEBI KRA Regulations:  

SEBI guidelines amending SEBI KRA Regulations^[1] are applicable to the following SEBI registered intermediaries:

1. KYC Registration Agencies (KRAs)
2. Stock Brokers through Stock Exchanges
3. Depository Participants through Depositories
4. Mutual Funds (MFs) and AMCs
5. Portfolio Managers (PMs)
6. Collective Investment Schemes
7. Investment advisors
8. Registrar and Share Transfer Agents
9. Custodians
10. Alternative Investment Funds (AIFs)
11. Association of Mutual Funds in India (AMFI)

Highlights of the guidelines in pursuance of amendments in SEBI KRA Regulations, 2011

Following are the highlights of the guidelines in pursuance of amendments in the KRA regulations that have been introduced:

1. KRAs will continue to act as the central repository of KYC data in the securities market and shall be responsible for safeguarding, storing and retrieving KYC documents and submit to the Board or any other statutory authority as and when the requirement arises.
2. The KRAs have been asked to independently validate records of both existing and as well as new clients whose KYC has been completed using Aadhaar card as the Official Valid Document (OVD). The clients whose KYC was completed using non-Aadhaar OVD shall be validated only upon receiving the Aadhaar Number.
3. The process of authentication by the KRAs shall be accomplished by authenticating the following details:
4. Aadhaar can be authenticated or verified through Unique Identification Authority of India (UIDAI).
5. In cases where the mobile number and e-mail id provided by the client has not been seeded with Aadhaar, then mobile number and e-mail can be authenticated using the OTP validation (only in the above cases)
6. Income Tax Database can be used by PAN

• A task of development of systems/ mechanisms in consultation with SEBI and coordination and cooperation amongst each other has been entrusted upon the KRAs. The KRAs will follow uniform internal guidelines detailing each aspects of identification of KYC attributes and procedure for KYC validation.
• The systems of both KRAs and the Registered Intermediaries (RIs) shall be integrated to facilitate seamless movement of KYC documents and to and from the RIs to the KRAs.
• KRAs need to promptly inform the RIs about the inadequacy/ deficiency in the client’s KYC documents which are used for validation.
• Once a successful KYC validation has been completed, every client is provided with a unique client identifier called the KRA identifier. The KRA assigns the KRA identifier to a client and this KRA identifier is used by the client to open accounts with any other intermediary without going through the same long-drawn, cumbersome repetitive KYC process.
• Validation of the KYC records of new clients who have used Aadhaar as an OVD shall take place in just two days of receipt of KYC records by KRAs.
• Validation of the KYC records of all the existing clients who have used Aadhaar as an OVD shall take place within a period of 180 days from 1^st July, 2022 onwards.
• Within a period of 2 working days of receiving the KYC records by the KRAs, either by post or email, the KRAs will intimate of the same to the KRA identifier and maintain the proof of such dispatch.
• The clients whose KYC records have not been found to be valid by the KRA after the process of validation; such clients will be allowed to transact in the securities market only after getting his KYC validation done.
• In cases where the KYC has been done based on non-Aadhaar OVD, the KRA will still store their records but the same would not be validated by KRAs unless Aadhaar number is provided by the client.
• The process of validation of all the KYC records both for old and new records shall commence from July, 1, 2022.      

Conclusion

This circular has been issued by SEBI in exercise of the 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 the investors in securities and to promote development of and regulate the securities markets.

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