Fintech

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November 7, 2022

A Complete Guide on SEBI KYC Guidelines

Want to know about the SEBI KYC guidelines set for the kyc registration companies in India? Click here to find the rules & regulation & the list of SEBI registered KRAs

Introduction

Operating a mutual fund house is subject to stringent regulations. Activities must be conducted within the structure already in place and governed by the Securities and Exchange Board of India (SEBI). This involves adhering to the SEBI KYC guidelines. Identifying a customer before enrolling them as an investor under a particular fund is known as "Know Your Client" or KYC in the business. Financial Institutions & Intermediaries are required by KYC rules to collect and validate personal & contact info from their clients.

Indian KYC Registration Agencies: SEBI KYC Guidelines

To guarantee consistency in handling data belonging to mutual fund investors. SEBI adopted a standard KYC application form in January 2012. For mutual funds, the verification procedure also entails In Person Verification (IPV). A KYC Registration Agency (KRA) maintains KYC data to expedite and centralize the information collection process. No matter how much money is invested, KYC is required for all applications.

The following transactions need to be verified in the prescribed format:

  • Additional or New Purchases
  • Activities like switching
  • Registration with SIP or MICRO SIP
  • Registration of STP

KRA's function in KYC

SEBI Regulations from 2011 require all KRAs to be registered. As previously stated, the primary role of this agency is to maintain KYC data on behalf of intermediaries approved by the regulatory agency to conduct business in the public domain. A financial intermediary, like a mutual fund, will do KYC on investors and provide information to the KRA to assist with this task. By working via the agency, an intermediary can quickly access the report. A consumer contacts intermediaries for investment to avoid the verification procedure from being repeated at any moment.

The firms listed below are KRAs that SEBI has registered:

  • Ventures Limited by CSDL
  • International DotEx Limited
  • Limited by Karvy Data Management
  • NSDL Database Management Limited (NDML) 
  • Private Limited CAMS Investor Services

Rules for KYC Registration Companies

These authorities' operations are governed by the KRA regulations that SEBI KYC guidelines released in 2011. The following information has been shared in part:

  • The agency must securely retain and protect any documents intermediaries receive from its customers. When necessary, such records ought to be immediately retrievable.
  • The agency must keep physical and electronic copies of the client's original papers provided by the intermediary. The retrieval of KYC data must take place within the allotted time frame.
  • The agency should inform all intermediaries interested in delivering financial services to the customer about any changes to the client's KYC information.
  • Registered KRAs must establish a cohesive network for information to be sent between them without delay.
  • The agency must send the customer a confirmation letter and an update on the status of the KYC verification after receiving the papers from the intermediary.
  • To ensure that any intermediary may only access an investor's data. After proper authentication, who approaches them? KYC Registration Agencies' infrastructure must have built-in checks.
  • It protects against unauthorised users of its databases, and the KRAs would exercise prudence and regularly check their systems.
  • All electronic documents a KRA keeps must be adequately backed up, and the authority must ensure that no investor-provided data is misplaced, deleted, or altered.

Conclusion

SEBI KYC guidelines allow critical information transmission through a single channel. The most obvious benefit of registering the KYC data with an agency. Because everything is held in a centralised database with controlled access for retrieval and update, it prevents duplication and ensures correctness. Furthermore, it saves clients the time and effort of filing papers each time they register for a service through an intermediary. Because records for future clients do not need to be retained on company resources, the intermediary saves a substantial amount of physical and digital space. They must call the corporation to validate the client's information.

FAQs

Does SEBI provide recommendations for KYC?
Only after getting the Aadhaar number will the records of clients who completed KYC with non-Aadhaar OVD be recognized.
How do KRA guidelines work?
The functions and responsibilities of intermediaries are defined under the SEBI KRA Regulations of 2011. Key points include: The intermediary must carry out the client's first KYC and careful analysis, upload the necessary data and paperwork to the KRA's system, and deliver the original KYC papers within the allotted period.
Is the data I give my KYC Registration Agency safe?
SEBI regulations require all registered KYC Verification Agencies to have a secure data transfer link to transfer all investor-provided data. To guarantee that the information given by investors stays closed, the KRAs are also in charge of the safekeeping of any KYC papers submitted by investors and must prohibit unauthorized access.
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