In the realm of financial regulations, the Securities and Exchange Board of India (Sebi) has opted for a streamlining of the risk management framework concerning the authentication of Know Your Customer (KYC) records via KYC Registration Agencies (KRAs). This strategic maneuver is poised to facilitate smoother transactions for investors, as per observations made by experts on Wednesday.
Within the revamped framework, KRAs are now empowered to cross-verify PAN, nomenclature, domicile, electronic mail, and telephonic digits against authorized databases. Should these particulars align satisfactorily, they shall be accorded the status of authenticated records, articulated Ankit Ratan, Co-founder & CEO of Signzy.
“The freshly minted framework is anticipated to tackle prevalent hurdles encountered by numerous investors while simultaneously ensuring the authentication of investors’ digital personas. Given the burgeoning adoption of digital avenues for investment purposes, the verification of digital identities has acquired paramount significance,” he supplemented.
The onus of effectuating requisite technical overhauls in their infrastructure by the end of May has been laid upon the exchanges, depositories, and pertinent intermediaries. Concurrently, mutual fund entities, brokerage establishments, and portfolio management service providers are mandated to deploy resilient compliance apparatuses and risk management blueprints to fortify the confidentiality and integrity of investor data. This endeavor aims to ensure that all investors undergo identity validation prior to being onboarded.
KRA entails entities such as CAMS KRA, BSE KRA, NSE KRA, among others. These entities are entrusted with the custodianship of the KYC particulars of individuals, typically sourced from brokers, exchanges, and intermediaries.
Sebi, on Tuesday, streamlined the risk management framework to facilitate client transactions, drawing insights from feedback gleaned from stakeholders within the securities market. By streamlining the directive, the regulatory authority has made modifications to the circular issued in October 2023.
In October of the preceding year, the authentication protocol underwent a revision, rendering proofs of residence such as ration cards, utility invoices, or digitized Aadhar cards obsolete. Presently, KRAs are mandated to verify specific attributes of client records within a two-day timeframe of receiving the KYC dossier, encompassing the Permanent Account Number (PAN), nomenclature, and domicile.
“Subsequently, client records authenticated by KRAs via authorized databases (Income Tax Department database on PAN, Aadhaar XML, Digilocker or M-Aadhaar) shall be deemed as ‘validated records’. Individuals possessing inadequate documentation shall be precluded from engaging in securities trading,” affirmed Feroze Azeez, Deputy CEO of Anand Rathi Wealth.
This initiative by Sebi is poised to safeguard investor interests in the realm of securities and nurture the evolution and governance of securities markets, constituting a significant stride towards consumer safeguarding, he added. Ratan of Signzy echoed similar sentiments, asserting that Sebi’s initiative shall fortify investor interests in the capital market and catalyze the evolution of security markets. It signifies a pivotal advancement towards augmenting digital reliance and establishing a secure digital ecosystem for investors.