Sebi’s master circular on KYC norms: What does it mean for the investors?

The Capital markets regulator Securities Exchange Board of India (Sebi)  released a set of  KYC (Know Your Customer) rules for investors via a master circular released on Thursday. 

It is a compilation of a number of directions issued by the regulator till Sep 30 and includes modifications to align these circulars with the Prevention of Money Laundering (maintenance  of records) Rules 2005. And any modification in the existing KYC records will be affected in line with the provisions of this circular by Dec 31, 2023. 

This master circular entails the following set of rules:

1. All Sebi-registered intermediaries will use the same KYC form and supporting documents. 

The account opening form for clients will be divided into two parts. The Part I of the AOF will be the KYC form which will capture the basic details of the client. 

And part II of the form will obtain the additional information specific to the area of activity of the intermediary as considered appropriate by them. The master circular, however, deals with the provisions of Part I of KYC form. 

2. To identify every participant in the securities market with their respective PAN thereby ensuring sound audit trail of all the transactions, PAN will be the unique identification number for all participants transacting in the securities market, regardless of the amount. 

And the registered intermediaries will verify the PAN of their clients online at the income tax website without insisting on the original or copy of the PAN card. 

3. There are a few exemptions to PAN requirements including for the SIP of mutual funds up to ₹50,000 per year. 

The name in the KYC form will match the name as mentioned in the proof of  identity submitted.

The documents that will be accepted as proof of identity include passport, driving licence, aadhaar number, voter's ID card, letter issued by the NPR and any other document as notified  by the Central Government in consultation with the regulator. 

4. A document shall be deemed to be an officially valid document even if there is a change in the name subsequent to its issuance provided it is supported by a Marriage Certificate  issued by the State  Government or a gazette notification, indicating such change of name.

5. There is a requirement of additional documents for non—individuals i.e., legal entities such as trust, partnership firm, HUF, registered society, among others. 

6. The registered intermediaries shall  upload  the details  of  mobile number and email address on the KRA system.

7. The in-person verification carried out by one Sebi registered intermediary can be relied upon by another intermediary.

8. The e-KYC service launched by UIDAI will be accepted as a valid process for KYC verification.