07 October, 2011

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

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/16/2011 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.

Source : SEBI Circular

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