SEBI Rolls out the Legal Entity Template

Ashish M. Shaji

22 Mar, 2021

The Securities Exchange Board of India recently rolled out the legal entity template through the powers conferred on it under Section 11 (1) of the SEBI Act of 1992^[1]. The rolling out of the Legal Entity Template was notified through SEBI Circular. According to this circular, the market regulator, SEBI, has asked the registered intermediaries to upload KYC data concerning the accounts of Legal Entities that are opened on or after April 1, to the Central KYC Registry.

Eligible Intermediaries for the Circular issued by SEBI on Legal Entity Template

The following intermediaries are eligible for this circular:

• All Recognized Stock Exchanges;
• All Recognized Depositories;
• Depository Participants through Recognized Depositories;
• Stock Brokers via Recognized Stock Exchanges;
• Association of Mutual Funds in India;
• All Mutual Funds and the Asset Management Companies through Association of Mutual Funds in India;
• Portfolio managers;
• KYC Registration Agencies;
• The Qualified Registrar to an Issue and Share transfer Agents;
• Alternative Investment Fund;
• Collective Investment Schemes;
• Custodians; and
• Investment Advisors.

It is worth mentioning here that the provision of this SEBI circular shall not apply to Foreign Portfolio Investors (FPI).

What was the need for the Legal Entity Template rolled out by SEBI?

The central KYC (Know Your Customer) registry was fully operational for individual clients, but now it has been decided to extend it to the legal entities also.

Consequently, the registered intermediaries are required to upload the KYC records and data of the accounts of legal entities that were opened on or after 1^st April 2021. Also, it may be noted that it would be done as per the provisions of Rule 9 (1A) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Therefore SEBI rolled out this circular.

Directions for Registered Intermediaries

The key directions for the Registered Intermediaries are as follows:

• The circular states that all registered intermediaries should ensure that in case of Legal Entity accounts that are opened before 1^st April 2021, the records concerning KYC should be uploaded to the Central KYC Registry when the updated KYC information is obtained/received from the client. Moreover, the registered intermediaries also need to confirm that during the receipt of the updated information, the KYC details of the client are migrated to the current Client Due Diligence Standard.
• Further to confirm that the existing KYC records of individual clients are incrementally furnished to the Central KYC registry, the registered intermediaries shall upload the KYC records and data regarding the accounts of individuals opened before 1^st August 2016 as and when the updated KYC details are received from the client.
• Where a client for the purpose of establishing an account based relationship furnishes a KYC identifier to a registered intermediary with an explicit consent to download records from the Central KYC registry, then such registered Intermediary is required to retrieve the KYC records online from the Central KYC Registry through the KYC identifier and the client is not required to submit the same KYC records or information or any other additional identification documents or such details, provided there is a change in the information of the client as prevailing in the records of the CKYC Registry.
• Once a KYC identifier is generated by the Central KYC Registry, the registered intermediaries shall ensure that it is duly communicated to the individual or to the legal entity.

Conclusion

In a nutshell, on powers provided under Section 11 (1) of the SEBI Act 1992, the market regulator- SEBI rolled out the Legal Entity Template and asked the registered intermediaries to upload the KYC data concerning accounts of Legal Entities that are opened after 1^st April 2021  to the Central KYC Registry. However, it may be noted that the provisions of this SEBI circular shall not apply to Foreign Portfolio Investors.

Read our article:All about SEBI (ICDR) (Amendment), Regulations, 2021