Dec 5, 2011

SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011

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SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011

The most awaited step by SEBI towards uniform KYC documentation has been taken in form of new regulations SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011 thereby removing the multiplicity of KYC procedure.

With the formulation of new Regulations, an endeavor has been made to create a mechanism for centralization of KYC records with KYC Registrations Agency (KRA) a new intermediary registered with SEBI.

The highlights of the new regulations for registration and supervision of KRAs is produced herein below:

  • Registrations of KRAs
    • The Regulations provides for eligibility and documentations required for filing to be registered as KRAs.
    • As under the Regulations, following entities can get registered as KRAs:
      • WOS of Recognized Stock Exchanges having nationwide terminals;
      • WOS of Depositories or any other intermediary registered with SEBI;
      • WOS of Self Regulatory Organizations as registered with SEBI.
    • Regulations further requires that the entity seeking registration must have continuous net-worth of Rs. 25 Crores and must be a Fit and Proper person as per Schedule II of SEBI (intermediaries) Regulations, 2008.
  • Period of validity of Certificate of Registration
    • The Regulations provides for registration in two phases – one initial Temporary Registration for 5 years and thereafter Permanent Registration.
    • The application for permanent registration is needed to be made three months prior to the expiry of the initial registration period. 
    • The Regulations also provide provisions for surrender of the Registration certificate.

  • Functions and Obligations of KRAs:
    • The KRA to obtain all KYC documents of the clients from the Intermediaries who are availing its services.
    • KRAs may prepare Operating Instructions in coordination with other KRAs
    • KRAs shall be required to have electronic connectivity and inter-operability with other KRAs and shall have secure data transmission link with other KRAs and intermediaries (availing its services) – this is important to ensure to centralization of data and avoid duplicity.
    • KRAs to ensure safeguard and proper storing and retrieval of KYC documents. Also to maintain KYC documents both in physical as well as soft format – the period of storage is to be notified by way of rules.
    • KRAs to ensure dissemination of information of any update about a client to all the intermediaries availing its services.
    • KRAs to have installed system to provide access of information to intermediaries only of clients who approach them.
    • KRAs to ensure the protection of automatic data processing system (for electronic records) and other documents and records to avoid any tampering or loss and proper back- ups of electronic records to be maintained.
    • KRAs to ensure proper mechanism of controls, systems, procedures and safeguards and to have regular audits thereof and ensure reasonable measures to prevent unauthorized access to its database and shall also appoint a compliance officer.
    • KRAs on receipt of KYC documents from the intermediary to verify the same from clients.
    • KRAs to ensure redressal of complaints within one month time.

  • Functions and Obligations of an Intermediary
    • The duty and ultimate responsibility of carrying the initial KYC/ due diligence of the client continues to be vested with the intermediaries only and the documents of KYC to be send by it to its KRA immediately. Although if the client approaches another intermediary, they have the option to verify and download client information from KRA system but must ensure to upload any change in client information. In case of mutual funds, RTA appointed by them may undertake KYC.
    • The Intermediary shall not misuse the information of the KYC data of KRA for other than specified purposes.
  • The Regulations further provides for provisions empowering SEBI Board to carry out Inspections of KRA and provides for procedure thereof. 
  • The Schedules of Regulations provides for Application form for registration as KRA, applicable fees and Code of conduct for KRA.

Attached herewith are the Circular No. MIRSD/Cir-23/2011 dated 02.12.2011 and the KRA Regulations.

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