Sebi Relaxes Norms For Investors To Get KYC Registered Status: Read More

Sebi relaxes norms for 'KYC registered' status and brings more clarity on 'KYC validated' status. Read on to learn more.
Sebi Relaxes Norms For Investors To Get KYC Registered Status
Sebi Relaxes Norms For Investors To Get KYC Registered Status

The Securities and Exchange Board of India (Sebi) has offered small relief to mutual fund investors by abolishing the requirement of linking Permanent Account Number (PAN) with Aadhaar to obtain 'KYC-registered' status. Sebi on May 14, released a circular that updated its master circular dated October 12, 2023. Know Your Client (KYC) process is a mandatory norm whereby entities such as banks, mutual fund houses, and stockbrokers validate an investor's identity before onboarding them and allowing them to invest via these institutions.

What Has Changed?

The revised circular says Sebi only mandates KYC Registration Agencies (KRAs) to client details, including PAN, name, and address, within two-days of receiving KYC records. Earlier they had to also verify the PAN-Aadhar linkage before giving investors the KYC registered status or investors would be in 'KYC hold' status. If the KYC status is on hold, an investor will not be able to do any mutual fund transactions, such as systematic investment plans (SIPs) or lump sum purchases. Even redemption requests will not go through.

Now if Aadhaar and PAN are not linked, and if you have done Aadhaar-based KYC, then you will get a 'KYC-Registered' status.

KYC-Registered is when an investor’s KYC is based on an ID proof other than Aadhaar and both their mobile number and email ID have been validated by KRA.

Further Sebi mandates that the client's records verified by KRAs with official databases (such as the Income Tax Department database on PAN, Aadhaar XML, Digilocker or M-Aadhaar) and PAN-Aadhar linkage shall be considered ‘validated records’. So the rule of PAN-Aadhar linkage now applies to get your KYC validated, which was erstwhile not there in the October circular.

So to obtain 'KYC-Validated' status, it is still necessary to link PAN and Aadhaar. In October, SEBI instructed all mutual fund investors to update their KYC by March 31 if it had not been completed using an "officially valid document (OVD)" such as an Aadhaar, passport, or driving license. However, practically they still have to do Aadhar-based KYC validation and PAN-Aadhar linkage has to be done.

A KYC-validated status means that the KYC is based on Aadhaar, and both the mobile number and email ID have been validated by the KRA.

Investors with a KYC-validated status can carry out transactions across all fund houses. On the other hand, investors who are only KYC-registered can only transact with the fund houses they already have investments with.

Sebi has asked the stock exchanges, depositories, and intermediaries to complete necessary technical changes in their systems by May 31, 2024, to enforce the new circular.

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