The role of KYC Registration Agency (KRA) in the securities market

Earlier to initiation of KRA by SEBI, investors were required to complete the KYC process as and when they interact with each type of SEBI Intermediaries by submitting the relevant documents, requirements of which may vary from intermediary to intermediary. In view of bringing uniformity in KYC requirements for the securities markets, SEBI has initiated {KYC (Know Your Client) Registration Agency (KRA)}, Regulations, 2011 that defines the role and obligations of KRA.

KRA(s) provide for the centralization of the KYC records in the securities market. This rule envisaged by SEBI enables an investor to invest/trade through various intermediaries, after undergoing the KYC process only once through an intermediary. Additionally, any subsequent changes in investor static/demographic information of an investor across various SEBI registered intermediaries can be made by giving a single request to the KRA through one of the registered intermediaries.

The registered KRA shall be responsible for storing, safeguarding, and retrieving the KYC documents that are being submitted by various SEBI registered intermediaries. KRA(s) shall have electronic connectivity with other KRA(s) in order to establish inter-operability among KRAs.  Any information updated and decimated by a KRA can be accessed by all the SEBI Registered Intermediaries while dealing with the same client. As a result, once the client has done KYC with a SEBI registered intermediary, he need not undergo the same process again with another intermediary

How does KRA function?

The KRA rules, apply to intermediaries such as stockbrokers, depository participants, mutual funds, portfolio managers, venture capital funds, and collective investment schemes. These market participant intermediaries have to first register with SEBI and secure a certificate for initial registration as a KRA.

The client who is desirous of opening an account/trade/deal with the SEBI registered Intermediary shall submit the KYC details through the KYC Registration form and supporting documents. The registered intermediaries on receipt of the application with KYC details have to mandatorily make in-person verification of clients before uploading the details on the system of KRA. On confirmation of KYC, the KRA shall dispatch an acknowledgment letter to clients who have provided the KYC to the intermediary.

KRAs are to have a comprehensive audit of their systems, controls, procedures, safeguards, and security of information and documents, to be annually done by an independent entity. The audit report and steps taken to rectify deficiencies are to be placed before its board of directors. Thereafter, the KRA would be required to send the action-taken report to SEBI within three months.