KYC is an acronym for “Know your Client,” a term commonly used for the client identification process. SEBI has prescribed certain requirements relating to KYC norms for financial institutions and financial intermediaries, including mutual funds.

This is in the form of verification of identity and address, obtaining information of financial status, occupation and such other demographic information.

With effect from January 2012, SEBI has set out revised KYC norms to make the process uniform across the securities market and introduced a common KYC application form for all SEBI-registered intermediaries, viz. mutual funds, portfolio managers, depository participants, and stock brokers, among others. Investors who have not fallen in line with the mutual fund KYC norms earlier need to use the uniform KYC application form to apply for KYC at the time of investment in mutual funds.

In the revised KYC regulations, in person verification (IPV) has been made mandatory for mutual fund investors as well.

Registration agency A KYC Registration Agency (KRA) is registered with SEBI under the 2011 regulations. The KRA maintains KYC records of investors centrally, on behalf of capital market intermediaries registered with SEBI.

An intermediary, for example, mutual fund/broking/DP, shall perform the initial KYC of its clients and upload the details on the system of the KRA. When the client approaches another intermediary, the intermediary can verify and download the client’s details from the system of the KRA. As a result, once the client has done KYC with a SEBI-registered intermediary, the client need not undergo the same process again with another intermediary.

Benefits of KRA Registering KYC with a KRA not only prevents duplication and inconvenience to investors but also enables single-point change management.

As an investor, if one is registered as KYC-compliant with any of the five KRAs, he/she can open an account easily with any SEBI-registered intermediary without going through the KYC process once again. Any subsequent changes in the investors’ static or demographic information can be made by giving one single request to any one of the registered intermediaries who will carry out the changes in the KRA system which will be immediately available for all the KRAs/intermediaries.

Further, market intermediaries who register with KRA are also benefited as they need not collect KYC documents from KYC-compliant clients, thus eliminating the need to collect and store the same.

Contributed by CAMS Viveka, the Investor Education initiative of CAMS.

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