| Know_Your_Client_Regulations_Apr17_2020 |
| 3 An application for the grant of a certificate of registration as a KRA shall be made to the Board in Form as specified in Schedule I and shall be accompanied by such fees and in such manner as specified in Schedule II of these regulations . Application to conform to the requirements |
| 4 An application, which is not complete in all respects and does not conform to the instructions prescribed in the Form and the requirements specified therein or the information, is false or misleading in any manner shall be rejected by the Board. Provided that before rejecting any such application, the applicant shall be given, in writing, an opportunity to remove, within thirty days of the date of communication in this regard, such objections as may be indicated by the Board. Notwithstanding anything contained in the first proviso, the Board may, on being satisfied that it is necessary, extend the time period by such further time, as it deems fit, in order to enable the applicant to remove the objections indicated by the Board. |
| 5 (1) The Board may require the applicant to furnish such further information or documents or clarifications as the Board considers necessary for the purpose of consideration of theapplication. |
| 5 (2) The applicant or his authorized representative shall, if so required, appear before the Board |
| 6 (1) The Board shall not consider an application , unless the applicant is a fit and proper person to the satisfaction of the Board and belongs to one of the following categories, namely:(a) a wholly owned subsidiary of a recognized stock exchange , having nation-wide network oftrading terminals, or;(b) a wholly owned subsidiary of a depository or any other intermediary registered with the Board or;(c) a wholly owned subsidiary of a Self Regulatory Organization (SRO) registered under SEBI(Self Regulatory Organization) Regulations, 2004,Provided that any conflict of interest does not exist between the role of the applicant as KRAand other commercial activities of the applicant , its associates and group companies.Provided further that the applicant shall have to satisfy to the Board about the organizationalcapabilities, technology and systems and safeguards for maintaining data privacy and preventingunauthorized sharing of data.Notwithstanding the aforementioned, the Board shall have the power to examine any possiblecase of conflict of interest in applications. |
| 6 (2) The applicant as mentioned in sub regulation (a) to (c) of regulation 6(1) above shall have a net worth of at least Rs 25 crore on a continuous basis. Grant of certificate of 3 registration |
| 7 (1) The Board , on being satisfied that the applicant is eligible, shall send intimation to that effect to the applicant , for the grant of certificate o4f registration, and grant a certificate in the Form as specified in Schedule I. 5[(1A) The KRA which has already been granted certificate of registration by the Board , prior to the commencement of the Securities and Exchange Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 shall be deemed to have been granted a certificate of registration, in terms of sub-regulation (1).] |
| 7 (2) The certificate of registration granted under sub-regulation (1) shall be valid unless it is suspended or cancelled by the Board.] |
| 7 (3) The grant of certificate of 7 registration shall be subject to the payment of such fees and in such manner as specified in Schedule II of these regulations . |
| 7 (4) The KRA shall immediately intimate the Board, details of changes that have taken place in |
| 8 (1) The KRA which has been granted a certificate of initial registration under regulation 7 may, three months before the expiry of the period of certificate of initial registration, make an application for grant of certificate of permanent registration in the Form as specified in Schedule I. |
| 8 (2) An application under sub-regulation (1) shall be accompanied by such fees and in such manner as specified in Schedule II of these regulations . |
| 8 (3) The application for grant of a certificate of permanent registration shall be accompanied by details of the changes that have taken place in the information that was submitted to the Board while seeking initial registration, as the case may be, and a declaration stating that no changes other than those as mentioned in such details have taken place. |
| 8 (4) The application for permanent registration made under sub-regulation (1) shall be dealt with in the same manner as if, it were a fresh application for grant of a certificate of initial registration. |
| 8 (5) The Board, on being satisfied that the applicant is eligible, shall send intimation to that effect, to the applicant and shall grant a certificate of permanent registration in the format as specified in Schedule I. |
| 8 (6) The grant of certificate of permanent registration shall be subject to payment of such fees and in such manner as specified in Schedule II of these regulations . |
| 9 For the purpose of determining whether an applicant is a fit and proper person, the Board may take into account the criteria specified in Schedule II of Intermediaries Regulations. |
| 10 The KRA holding a certificate of registration shall at all times abide by the Code of Conduct as specified in Schedule III of these regulations. |
| 11 (1) Where an application for the grant of certificate of 10 registration does not satisfy the requirements specified in regulation 6 & 9, the Board shall reject the application after giving the applicant an opportunity of being heard. |
| 11 (2) The decision of the Board to reject the application shall be communicated to the applicant in writing within thirty days of such decision, stating therein the grounds on which the application has been rejected . |
| 11 (3) Any applicant , aggrieved by the decision of the Board, may apply within a period of thirty days from the date of receipt of such intimation to the Board for reconsideration of its decision. |
| 11 (4) The Board shall reconsider an application made under sub-regulation (3) and |
| 12 A KRA whose application for grant of certificate of permanent registration has been refused by the Board , on and from the date of the receipt of the communication, shall cease to carry on any activity as a KRA; Provided that the Board may, in the interest of the investors of the securities market , permit KRA to carry on activities undertaken prior to the receipt of the intimation of refusal subject to such condition as the Board may specify. |
| 12 (2) While disposing a surrender request under these regulations, the Board may require the KRAto satisfy the Board about the factors, as it deems fit, including but not limited to the followinga. the arrangements made by KRA for maintenance and preservation of records andother documents required to be maintained under these regulations;b. redressal of investor grievances;c. transfer of records of its clients;d. the arrangements made by it for ensuring continuity of service to the clients;e. defaults or pending action, if any. |
| 12 (3) While accepting the surrender, the Board may impose such conditions upon the KRA, as itdeems fit, for protection of the interests of investors and the securities market , and such personshall comply with such conditions. |
| 12 (4) On and from the date of the surrender or cancellation of the certificate, the KRA shall-(a) return the certificate of registration so cancelled to the Board and shall not represent itself tobe a holder of the certificate for carrying out the activity for which such certificate had beengranted;(b) cease to carry on any activity in respect of which the certificate had been granted;(c) transfer its activities to another entity holding a valid certificate of registration to carry onsuch activity and allow its clients to withdraw any assignment given to it, without any additionalcost to such client;(d) make provisions as regards liability incurred or assumed by it;(e) take such other action including the action relating to any records or documents that may bein custody or control of such person, within the time period and in the manner, as may be required |
| 13 (1) A KRA, who has been granted a certificate of registration under the Act or the regulations made there under, desirous of giving up its activity and surrender the certificate, may make a request for such surrender to the Board. Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016. Prior to substitution, it sub-regulation (2) read as under: Intermediaries) (Amendment) Regulations, 2016. Prior to omission regulation 12 read as under: |
| 14 The KRA shall obtain the KYC documents of the client from the intermediary; as prescribed by the Board and in terms of the rules, regulations , guidelines and circulars issued by the Board or any other authority for Prevention of Money Laundering, from time to time. |
| 15 The KRA has the following functions and obligations (a) KRA may prepare the Operating Instructions in co-ordination with other KRA(s) and issuethe same to implement the requirements of these regulations .(b) KRA(s) shall have electronic connectivity and with other KRA(s) in order to establish inter-operability among KRAs.documents of the client are in the custody of another KRA.(c) KRA shall have a secure data transmission link with other KRA(s) and with each intermediarythat uploads the KYC documents on its system and relies upon its data.(d) KRA shall be responsible for storing, safeguarding and retrieving the KYC documents andsubmit to the Board or any other statutory authority as and when required.(e) KRA shall retain the 12[] KYC documents of the client , in 13[] electronic form for the periodspecified by Rules, as well as ensuring that retrieval of KYC information is facilitated withinstipulated time period.(f) Any information updated about a client shall be disseminated by KRA to all intermediariesthat avail of the services of the KRA in respect of that client .(g) KRA shall ensure that the integrity of the automatic data processing systems for electronicrecords is maintained at all times.(h) KRA shall take all precautions necessary to ensure that the KYC documents/records are notlost , destroyed or tampered with and that sufficient back up of electronic records is available atall times at a different place.(i) KRA shall have adequate mechanisms for the purposes of reviewing, monitoring andevaluating its controls, systems, procedures and safeguards.(j) KRA shall cause an audit of its controls, systems, procedures and safeguards to be carried outperiodically and take corrective actions for deficiencies, if any and report to Board .(k) KRA shall take all reasonable measures to prevent unauthorized access to its database andhave audit of its systems and procedures at regular intervals as prescribed by the Board .(l) KRA shall have checks built in its system so that an intermediary can access the informationonly for the client s who approach him.(m)KRA shall appoint a compliance officer who shall be responsible for monitoring thecompliance of the Act, rules and regulations , notifications , guidelines , instructions, etc., issuedby the Board or the Central Government and for redressal of client s grievances. The complianceofficer shall immediately and independently report to the Board any non-compliance observedby him.(n) KRA shall send a letter to each client after receipt of the KYC documents from theintermediary, confirming the client s details thereof.(o) KRA shall take adequate steps for redressal of the grievances of the client s within one monthof the date of receipt of the complaint and keep the Board informed about the number , natureand other particulars of the complaints from such investors.03-2013.13 ibid. |
| 16 The Intermediary has the following functions and obligations 14[(a) The intermediary shall perform the initial KYC/ due diligence of the client , upload the KYCinformation with proper authentication on the system of the KRA, furnish the scanned imagesof the KYC documents to the KRA, and retain the physical KYC documents:Provided that in the case of client s of a mutual fund, the Registrar to an Issue and Share TransferAgent appointed by the mutual fund may perform the initial KYC/ due diligence of the client ,upload the KYC information with proper authentication on the system of the KRA, and furnishthe scanned images of KYC documents to the KRA.]15[(aa) The intermediary or the mutual fund, as the case may be, shall furnish the physical KYCdocuments or authenticated copies thereof to the KRA, whenever so desired by the KRA.]16[(b) When the client approaches another intermediary subsequently, the intermediary shallverify and download the client s details from the system of KRA:Provided that upon receipt of information on change in KYC details and status of the client s bythe intermediary or when it comes to the knowledge of the intermediary , at any stage, the intermediary shall be responsible for uploading the updated information on the system of KRAand retaining the physical documents.(c) An intermediary shall not use the KYC data of a client obtained from the KRA for purposesother than it is meant for; nor shall it make any commercial gain by sharing the same with anythird party including its affiliates or associates.(d) The intermediary shall have the ultimate responsibility for the KYC of its client s, byundertaking enhanced KYC measures commensurate with the risk profile of its client s.17[Sharing of KYC information in the financial sector.22-03-2013 for the following:(a) The intermediary shall perform the initial KYC/ due diligence of the client , shall upload the KYC informationon the system of the KRA and send the original KYC documents to KRA forthwith from the date of account openingor within the time as prescribed by the board from time to time. However, in case of mutual funds, an RTA appointedby the mutual fund may also undertake the KYC of the client and send the original documents to the mutual fundor KRA.22-03-201313-03-2014 for the following:(b) When the client approaches another intermediary subsequently, it will be optional for the intermediary to verifyand download the client s details from the system of KRA or to take fresh KYC as per existing system. However,upon receipt of information on change in KYC details and status of the client s by the intermediary or when it comesto the knowledge of the intermediary , at any stage, the intermediary shall be responsible for uploading the updatedinformation on the system of KRA and 16[retaining the physical documents]. |
| 16A (1) The entities, regulated by other regulators in the financial sector specified by the Board from time to time, may access the system of KRA for undertaking KYC of their clients who engage them for financial services. |
| 16A (2) The provisions of these regulations shall, mutatis mutandis, apply to the entities regulated by other regulators specified in sub-regulation (1). |
| 16A (3) The system of KRA may be connected with any central KYC registry authorised by the Central Government for the purpose of collation and sharing of the KYC information in the financial sector.] |
| 17 In order to remove any difficulties in the application or interpretation of these regulations , the Board shall have the power to issue clarifications and guidelines in the form of notes or circulars which shall be binding on the KRA and the intermediaries. |
| 18 (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records, documents, infrastructure, systems and procedures, of a KRA, for any purpose specified in sub-regulation (2). |
| 18 (2) The Board may inspect a KRA for the following purposes:(a) that the books of accounts, records and KYC documents, as prescribed by the Board, arebeing maintained by the KRA;(b) to look into the complaints received by the KRA from clients or any other person;(c) to ascertain whether the provisions of the Act and these regulations are being complied with;(d) to ascertain whether the systems, procedures and safeguards being followed by a KRA areadequate;(e) to ensure that privacy of clients data is maintained and the same is not shared with any otheragency/associates in violation of these regulations ;(f) to ensure that the affairs of a KRA are being conducted in a manner which are in the interestof the investors and securities market. |
| 19 (1) Before undertaking an inspection under regulation 19, the Board shall give not less than 10 days notice to the KRA, for that purpose. |
| 19 (2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given , it may, by an order in writing direct that the inspection of the affairs of the KRA be taken up without such notice. |
| 19 (3) On being empowered by the Board , the inspecting authority shall undertake inspection and the KRA against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 20. |
| 20 (1) It shall be the duty of the KRA whose affairs are being inspected, and of every director, officer and employee thereof, to produce to the inspecting authority such books, accounts, records and other documents in its custody or control and furnish him with such statements and information relating to its activities as a KRA, within such reasonable period as the inspecting authority may require. |
| 20 (2) The KRA shall allow the inspecting authority to have reasonable access to the premises occupied by it or by any other person on their behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the KRA or any other person on their behalf and also provide copies of the documents or other materials which, in the opinion of the inspecting authority are relevant for the purposes of the inspection. |
| 20 (3) The inspecting authority , in the course of inspection, shall be entitled to examine or to record the statements of any director , officer or employee of the KRA. |
| 20 (4) It shall be the duty of every director, officer or employee of the KRA to give to the inspecting authority all assistance in connection with the inspection, which the inspecting authority may reasonably require. |
| 21 The inspecting authority shall, as soon as possible, on completion of the inspection, submit a report to the Board : Provided that if directed to do so by the Board the inspecting authority shall submit interimreports. |
| 22 (1) The Board shall, after consideration of the inspection report, communicate the findings of the inspecting authority to the KRA, seek its comments on the same and if required, give it an opportunity of being heard. |
| 22 (2) On receipt of the reply, if any, from the KRA, the Board may call upon him to take such measures, as the Board may deem fit, in the interest of the securities market and for due compliance with the provisions of the Act, and these regulations. |
| 23 The Board shall after consideration of the inspection report take such action as provided under Chapter V of the Intermediaries Regulations and in terms of the Act. |
| 24 (1) The Board shall have the power to appoint a qualified independent auditor to inspect, into the books of accounts, records, documents, infrastructures, systems and procedures of a KRA. |
| 24 (2) The Board shall be entitled to recover from the KRA such expenses including fees paid to the auditors, as may be incurred by it for the purposes of inspecting the books of accounts, |
| 25 A KRA shall be liable for action if it (a) contravenes any of the provisions of the Act, and these regulations;(b) fails to furnish any information relating to its activity as a KRA as required under theseregulations;(c) does not co-operate in any inspection or investigation or enquiry conducted by the Board;(d) fails to comply with any direction of the Board;(e) fails to pay the requisite fees to the Board;and shall be dealt with in the manner provided under the Chapter V of the Intermediaries |
| 26 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets . |
| 26 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the |