Technical Analysis

Broker must know your details

Raghu Kumar | Updated on April 06, 2014 Published on April 06, 2014


You are looking at newspapers daily and cannot help but notice that markets are rallying. After thinking it through, you decide to set aside some of your savings and begin investing and trading in the stock markets. You choose your broker and begin the application process.

Your broker then asks for an ‘In Person Verification’(IPV), which is part of their ‘Know Your Client’ (KYC) process as prescribed by the Securities and Exchange Board of India (SEBI). Furthermore, SEBI has made it mandatory, effective January 1, 2012, to unify KYC processes into a concept called KYC Registration Agency (KRA).

So what are these KYC, KRA, IPV requirements, and why is it so important for the broker to know your details?

KYC, KRA, and IPV

KYC was officially implemented on January 1, 2011 by SEBI for the brokers to “know” each and every one of their clients. For a broker to be KYC-compliant, each account-holder has to fill out a certain set of documents.

Unification of KYC documents was a step in the right direction for multiple reasons. Firstly, brokers were forced to unify the entire KYC process. Secondly, KRA keeps the records of all individuals who have successfully gone through the KYC process. Therefore, this centralisation of KYC records made it beneficial for the client: once the client had undergone KYC with his/her desired SEBI-registered intermediary, he/she did not have to go through the process again with any other intermediary. In other words, once you’ve gone through the KYC process, you are in the KRA.

Personal verification

This brings us to IPV. The IPV requirement was put into place by SEBI on July 2, 2008. Its purpose was that each broker had the responsibility to satisfactorily “identify” his/her clients. Therefore, the client had to be identified “in-person” by the broker’s staff during registration. Since many brokers do not have branches in tier 2 and tier 3 cities, SEBI has streamlined the process so that IPV can be done through a web camera.

More and more brokers are now resorting to web cameras to conduct the IPV of their clients. If you are asked to present your document through a webcam, ensure that the camera quality is good. The good news about doing an IPV over a web camera is the ease of use and efficiency as the entire process can be done within minutes. Although IPV appears to be a tedious task, it is a good measure undertaken by SEBI to minimise fraudulent transactions such as trades on your behalf.

The writer is Cofounder of RKSV

Published on April 06, 2014
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