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SEBI, FMC to implement common KYC norms

At present, trading in equity and commodity markets require separate KYCs

July 12, 2012 4:25 IST | India Infoline News Service
Commodity markets regulator FMC (Forward Markets Commission) has proposed to join SEBI (Securities and Exchange Board of India) for common know your customer (KYC) norms to simplify the customer identification process in commodity and equity markets, according to media reports.

Once formalised, investors wanting to participate in equities, mutual funds and commodity futures will need to get only one KYC done, which will be acceptable to all intermediaries and both regulators, the reports added.

FMC chairman Ramesh Abhishek had met SEBI chairman UK Sinha to discuss the possibility of a common KYC in the two markets, where almost 99% of participants are common. The SEBI chairman, in principle, agreed to the common KYC proposal, the reports said.

At present, trading in equity and commodity markets require separate KYCs. The process is tedious and cumbersome as the clients have to provide the same details each time they wish to take a membership.

Sanender Singh, relationship manager, Sharekhan Ltd, said, “Introducing common KYC will be difficult as both the segments—commodity and equity—are different and the exchanges for these segments are also different. If there is a common KYC for both the markets, then it will surely benefit the customers as well as the brokers.”

Mr Singh further said, “Broking companies will not have to maintain separate documents for different markets and customers will be more comfortable in signing a common KYC. Major benefits would include less number of signatures, no different documentation required and faster processing of account opening.”

FMC has agreed to use SEBI’s KYC Registration Agency (KRA). But, KRA should give its periodical report to FMC in addition to its existing reportage to SEBI. In principal, the SEBI has also agreed to the KRA’s mandatory reporting to FMC. For SEBI and FMC to use the same KRA platform, the KYC documentation needs to be common, which is currently different, with some more documents required by FMC.

KRA is an entity that centrally maintains KYC records of investors on behalf of intermediaries, including brokers, depositories and asset management companies (AMCs) for mutual funds. At present, there are four KRA agencies registered with SEBI.

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