Brokers body seeks three-month extension from Sebi for KYC validation

Brokers have requested for a three-month extension from the Securities and Exchange Board of India (Sebi) for the validation of Know Your Client (KYC) records.

In a letter to Sebi, industry body -- Association of National Exchanges Members of India (Anmi) -- has cited various issues and concerns raised by its members that have hampered the smooth completion of the validation process within the stipulated timeline.

The Sebi circular had given KYC Registration Agencies (KRAs) a timeline of 180 days, ending on April 30, 2023, to validate client KYCs.

However, Anmi claims in its letter that the necessary data was provided by the KRAs to many of its members only on April 29, 2023, leaving insufficient time for the validation process.

Additionally, this data was shared on a non-working day, creating a last-minute rush and potential for error.

Further, there is a lack of clear guidance for intermediaries registered with only one KRA agency.

Anmi states that for KYC validation, KRAs want intermediaries to go to each KRA agency and get their client data.

Moreover, only two KRAs, CVL and NDML, have shared validation link details, leaving uncertainty around the processes for clients registered with CAMS, KARVY, and DOTEX.

KRAs are agencies that maintain investor’s KYC records centrally on behalf of the capital market intermediaries such as brokerages and MFs.

Further, Anmi said clients could have multiple accounts; they may have made modifications with one intermediary and not another.

And hence there can be differences in data available with KRA and intermediaries; such mismatches will lead to high client queries.

The letter also mentioned discrepancies in the date of birth, client’s name differences between KRA and the PAN site, and incorrect tagging of address proof among the problems raised.

There are also concerns around the status of KYC validation, with instances of validated KYCs being tagged as 'registered' instead of 'validated'.

The Anmi letter mentioned that intermediaries had received alerts from KRA agencies about the non-receipt of XML files despite timely data sharing.

This has led to additional follow-ups and coordination issues between KRAs.

In a meeting with the regulator on Tuesday, Anmi also raised issues regarding their client bank accounts. In an earlier letter to the regulator, Anmi had alleged that law enforcement agencies are directing banks to freeze the client bank accounts of brokers if they receive any complaint of fraudulent transfer of money from investor bank accounts.

The industry body has said such account freezes are disrupting the day-to-day working of brokers without any fault of theirs.