(1) A KRA, who has been granted a certificate of registration under the Act or the regulationsmade there under, desirous of giving up its activity and surrender the certificate, may make arequest for such surrender to the Board.
10 The words “initial or permanent” omitted by the Securities andExchange Board ofIndia (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,2016 w.e.f. 08-12-2016. Prior to substitution, it sub-regulation (2) read as under:
11 Omitted by the Securities andExchange Board ofIndia (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,2016 w.e.f. 08-12-2016. Prior to omission regulation 12 read as under:
“Effect of refusal to grant certificate of permanent registration
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.”
(2) While disposing a surrender request under these regulations, the Board may require theKRA to satisfy the Board about the factors, as it deems fit, including but not limited to thefollowing – a. the arrangements made by KRA for maintenance and preservation of records and other 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.
(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.
(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 representitself to be a holder of the certificate for carrying out the activity for which suchcertificate had been granted;
(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 tocarry on such activity and allow its clients to withdraw any assignment given to it,without any additional cost 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 thatmay be in custody or control of such person, within the time period and in themanner, as may be required under the these regulations, or as may be directed by theBoard.
CHAPTER III FUNCTIONS AND OBLIGATIONS OF KRA AND INTERMEDIARY Documents to be obtained by the KRA for the purpose of KYC
14. The KRA shall obtain the KYC documents of the client from the intermediary; as prescribedby the Board and in terms of the rules, regulations, guidelines and circulars issued by theBoard or any other authority for Prevention of Money Laundering, from time to time.
Functions and obligations of the KRA
15. The KRA has the following functions and obligations –
(a) KRA may prepare the Operating Instructions in co-ordination with other KRA(s) andissue the same to implement the requirements of these regulations.
(b) KRA(s) shall have electronic connectivity and with other KRA(s) in order to establishinteroperability among KRAs.
Explanation: Inter-operability means the ability of the KRA to determine whetherthe KYC 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 eachintermediary that uploads the KYC documents on its system and relies upon its data.
(d) KRA shall be responsible for storing, safeguarding and retrieving the KYCdocuments and submit to the Board or any other statutory authority as and whenrequired.
(e) KRA shall retain the 12[] KYC documents of the client, in 13[]electronic form for the period specified by Rules, as well as ensuring that retrieval ofKYC information is facilitated within stipulated time period.
(f) Any information updated about a client shall be disseminated by KRA to allintermediaries that 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 forelectronic records is maintained at all times.
(h) KRA shall take all precautions necessary to ensure that the KYC documents/recordsare not lost, destroyed or tampered with and that sufficient back up of electronicrecords is available at all 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 becarried out periodically and take corrective actions for deficiencies, if any and reportto Board.
(k) KRA shall take all reasonable measures to prevent unauthorized access to its databaseand have 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 theinformation only for the clients 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., issued by the Board or the Central Government and for redressal of client’sgrievances. The compliance officer shall immediately and independently report to theBoard any noncompliance observed by 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 clients within onemonth of the date of receipt of the complaint and keep the Board informed about thenumber, nature and other particulars of the complaints from such investors.
12 Omitted by SEBI {KYC(Know Your Client) Registration Agency} (Amendment) Regulations, 2013 w.e.f. 22- 03-2013.
13 ibid.
Functions and obligations of an Intermediary
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 KYC information with proper authentication on the system of the KRA, furnish the scanned images of the KYC documents to the KRA, and retain the physical KYC documents:
Provided that in the case of clients of a mutual fund, the Registrar to an Issue and Share Transfer Agent 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 furnish the 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 KYC documents or authenticated copies thereof to the KRA, whenever so desired by the KRA.]
16[(b) When the client approaches another intermediary subsequently, the intermediary shall verify 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 clients by the 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 KRA and retaining the physical documents.
(c) An intermediary shall not use the KYC data of a client obtained from the KRA forpurposes other than it is meant for; nor shall it make any commercial gain by sharingthe same with any third party including its affiliates or associates.
(d) The intermediary shall have the ultimate responsibility for the KYC of its clients, byundertaking enhanced KYC measures commensurate with the risk profile of itsclients.
17[Sharing of KYC information in the financial sector.
14 Substituted by the SEBI {KYC(Know Your Client) Registration Agency} (Amendment) Regulations, 2013 w.e.f. 22-03-2013 for the following:
(a) The intermediary shall perform the initial KYC/due diligence of the client, shall upload the KYC information on the system of the KRA and send the original KYC documents to KRA forthwith from the date of account opening or within the time as prescribed by the board from time to time. However, in case of mutual funds, an RTA appointed by the mutual fund may also undertake the KYC of the client and send the original documents to the mutual fund or KRA.
15 Inserted by the SEBI {KYC(Know Your Client) Registration Agency} (Amendment) Regulations, 2013 w.e.f.
22-03-2013 16 Substituted by the SEBI {KYC(Know Your Client) Registration Agency} (Amendment) Regulations, 2014 w.e.f. 13-03-2014 for the following:
(b) When the client approaches another intermediary subsequently, it will be optional for the intermediary to verify and 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 clients by the 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 KRA and 16[retaining the physical documents].
17 Inserted by the SEBI {KYC (Know Your Client) Registration Agency} (Second Amendment) Regulations, 2014, w.e.f. 11-8-2014.