The new system will require all investors to register with Sebi to get their unique identification numbers, which will have to be quoted for all trades. The exact modalities are not known, though an announcement to this effect is likely to be made on Friday after Sebi approves the proposal.
Through the use of unique identification numbers, Sebi aims at countering the menace of benami accounts and make regulatory supervision easier.
Sources close to the development said recent revelations in the Yes Bank IPO investigation have prompted the regulator to go ahead with the move sooner than later.
Sebi had earlier mooted the idea of building up a central database of market participants - called Mapin - that would be readily available to all concerned. Investors involved in a transaction of Rs 1 lakh or more in the securities market were required to quote their unique identification numbers from April 1, 2005.
In order to collect Mapin identity numbers, Sebi had appointed the National Securities Depositories Ltd, which in turn had engaged agents for this purpose.
Apart from details like address proof, the Mapin registration also sought to collect bio-metric data such as fingerprints of applicants. But Mapin did not come about with market participants complaining about the cumbersome process.
A Sebi appointed Mapin committee had recommended against gathering fingerprints of market participants following which, the Mapin registration process was discontinued. The committee had suggested a new software system called "dedupe".
Under this system, unique identification numbers were to be issued to participants without the use of the biometric systems but with more information parameters and in a more cost-effective manner.
Since the main objective of Mapin was regulation and creation of a single database of investors, issuers and intermediaries, the committee had recommended that Sebi bear the cost or charge a nominal fee from applicants, if necessary.
Further, the committee had suggested heavy penalty for false disclosures. The new Mapin was recommended to be implemented in a phased manner with domestic investors in the debt, equity and derivative markets being covered in the first round, followed by investors in mutual funds, intermediaries and foreign institutional investors.
It may also be recalled that CB Bhave, chairman and managing director, NSDL, had resigned from the committee apparently due to disagreements over the new system.