Sebi announces Uniform Know Your Client (KYC) Requirements for the Securities Markets

Securities and Exchange Broad of India

Capital market regulator Sebi  vide CIRCULAR  MIRSD/SE/Cir-21/2011 , Dated-  October 5, 2011 announces  introduction of uniform forms and documents for the purpose of customer identification by different market intermediaries like stock exchanges and mutual funds, a step intended to bring uniformity to the process. The new rule will be effective from January 1 next year.

“In case of mutual funds, portfolio managers, collective investment schemes and venture capital funds, though certain basic requirements have been prescribed for Customer Due Diligence (CDD) or KYC, no specific KYC format has been prescribed. As a result, these intermediaries use different KYC formats and supporting documents,” it said.

The new KYC form will have space for giving identity details including name, nationality, PAN and/or UID number besides details like address, gross annual income and occupation.

In addition, additional information specific to dealing in stock exchanges is also included in the form.

The customers will also have to furnish various documents relating to their identity, proof of address and other facts.

In case of corporates, they will have to provide copy of balance sheet for last two financial years, copy of latest holding pattern in their firm, copies of memorandum and articles of association and copies of board resolution for investment in securities market.

Foreign Institutional Investors will have to furnish copy of Sebi registration certificate, while registered societies will have to provide copy of such certificate and list of managing committee members.

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Circular

1. SEBI has been getting feedback from the investors that various SEBI registered intermediaries follow different KYC requirements.

2. In case of Mutual Funds, Portfolio Managers, Collective Investment Schemes and Venture Capital Funds, though certain basic requirements have been prescribed for Customer Due Diligence (CDD) or Know Your Client (KYC), no specific KYC format has been prescribed. As a result, these intermediaries use different KYC formats and supporting documents.

3. SEBI has recently initiated steps in this direction in consultation with major stock exchanges, depositories, AMFI and market participants. In case of stock brokers (and also for the stock brokers who are depository participants), the account opening process for investors has been simplified vide SEBI Circular No. CIR/MIRAD/16/201 1 dated August 22, 2011 (available on SEBI website), KYC form capturing the basic details about the client has been prescribed as Part I of the account opening form and additional information specific to dealing in the stock exchange(s) are obtained in Part II of the form.

4. With a view to bring about uniformity in securities markets, it has also been decided that the same KYC form and supporting documents shall also be used by all captioned SEBI registered intermediaries. The KYC form as given in Annexure-1 shall be filled by an investor at the account opening stage while dealing with any of the above intermediaries. Additional details specific to the area of activity of the intermediary being obtained now but not covered in the KYC form shall also be obtained from the investors in Part II of the account opening form.

5. The additional information (Part II) shall be prescribed by Depositories for their depository participants and by Association of Mutual Funds in India (AMFI) for all mutual funds. The Portfolio Managers, Venture Capital Funds, and Collective Investment Schemes shall capture the additional information specific to their area of activities, as considered appropriate by them. The intermediaries shall also continue to abide by Circulars issued by SEBI from time to time for prevention of money laundering.

6. The intermediaries shall take necessary steps to implement this circular and ensure its full compliance in respect of all new clients from January 1, 2012.

7. The Depositories are also directed to bring the provisions of this circular to the notice of their Depository Participants, make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in coordination with each other and verify its compliance through internal audits and inspections.

8. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.

Yours faithfully,

B. N. Sahoo
Deputy General Manager
022-26449250
email: [email protected]

Enclosure: Annexure -1

Download Full Notification alongwith Annexure- 1