Know Your Client

What is Know Your Client?

Know Your Client acronymed as KYC is a term commonly used for Customer Identification Process. Know Your Customer (KYC) norms are now mandatory for ALL applicants/investors (including existing investors and joint holders) to make investments in the Capital market irrespective of the amount of investment.

What is the KYC requirement under Prevention of Money Laundering Act, 2002?

SEBI had vide its circular dated October 5, 2011 notified Uniform KYC Form and supporting documents required to be used by all SEBI registered intermediaries (including Mutual Funds) for new client accounts. The uniform KYC requirement is effective from January 1, 2012.

With a view to bringing about an uniformity in the KYC requirement and a mechanism for centralization of the KYC records in the securities market, SEBI has vide its various circulars mandated that an investor who deals with any of the SEBI registered entities, viz. Trading Members, Depository Participants (DPs), Mutual Funds, Portfolio Managers, etc. shall be required to fill the common KYC form and submit the same along with the specified documents ( refer to https://www.cvlkra.com/ > Downloads > KYC Forms ) at the account opening stage with any of the SEBI registered intermediaries ('Intermediary').

What are KRA guidelines?

With effect from Jan 01, 2012, to bring uniformity in securities markets, SEBI has prescribed uniform KYC form and supporting documents to be used by SEBI registered intermediaries such as TMs, DPs, MFs, AMFI, PMs, Collective Income Schemes and Venture Capital Funds. For this purpose, KYC registration is centralized through KYC Registration Agencies (KRAs) registered with SEBI. The KRA will maintain KYC records of the investors centrally, on behalf of capital market intermediaries registered with SEBI.

What is IPV?

IPV or In-person Verification is also an additional requirement by SEBI under the KYC requirements from January 1, 2012 wherein the registered intermediaries will verify the investor physically. Mere submission of identity and address proof is not sufficient under the new regulations.

Who can carry out the IPV?

Following intermediaries can carry out the In-person Verification procedure:

• KYC registration agencies (KRAs)
• Stock brokers through stock exchanges
• Depository participants through depositories
• Mutual funds
• Portfolio managers
• Venture capital funds
• Collective investment schemes
• NISM/AMFI certified distributors who are KYD compliant
• Scheduled commercial banks

Which agency acts as a KRA for processing the KYC applications?

CDSL Ventures Limited (CVL), NDML, CAMS and DOTEX etc. act as the KRA for processing the KYC Application forms effective 01st Jan 2012.

Would an intermediary be required to do In-Person Verification (IPV), for a KYC compliant client?

As per SEBI circular MIRSD/Cir-26/2011, dated December 23, 2011, it shall be mandatory for all the intermediaries to carry out In-Person Verification (IPV) of their clients, if not already done. The IPV carried out by one SEBI registered intermediary can be relied upon by another intermediary.

How does the KRA benefit the investors and the intermediaries?

KRA not only prevents duplication and inconvenience to investors, it also enables a single point change management. Further, intermediaries need not collect KYC documents from KYC compliant clients, thus eliminating the need to collect and store the same. Inspection would be on the basis of scanned images, which would simplify compliance with KYC requirements.

Would there be any change in the KYC procedure for Corporates, FIIs and other Non- individual entities?

KYC procedures for Corporates, FIIs and other non-individual entities are to be complied as specified under SEBI Circular No. MIRSD/SE/CIR-21/2011, dated October 5, 2011 and these are subject to change from time to time based on SEBI circulars or as per any other regulatory requirements.