SEBI, vide its circular dated 29 th July, 2022 came out with framework involving stock exchanges and depositories to ensure that the client furnishes accurate/updated details of address and to ensure that KYC details are correct.
Following guidelines/instructions are proposed by SEBI under following framework :
Where SEBI instructs MIIs to serve any Show Cause Notice (“SCN”) or order issued by SEBI, the MIIs shall arrange to physically deliver the same to the entity.
The MIIs shall forward the signed acknowledgement of its receipt to SEBI within a period of 30 working days. If none of the MIIs are –
i) able to deliver the SCN or order, as the case may be, at any of the addresses mentioned in the KYC records linked to any trading/demat account of the entity; and
ii) obtain a signed acknowledgement of its receipt from the entity or its authorized representative,
Then all MIIs shall deactivate all trading and demat accounts i.e. implement a restraint/freeze on debit and credit (except for corporate actions) of all trading and demat accounts of the entity based on the entity’s Permanent Account Number (PAN), within 5 working days from the last unsuccessful delivery report. MIIs shall send an email/SMS to the entity before deactivation. It is clarified that if one of the MIIs is able to deliver the SCN or order, as the case may be, to the entity and obtain signed acknowledgement, then none of the accounts of the entity shall be deactivated. However, the MIIs, through their registered intermediaries, shall ensure that the KYC records linked to all accounts held by the entity, are updated, accurate and confirm the new KYC details to the concerned KYC Registration Agency (KRA).
Pending pay-in and pay-out obligations and open positions may be permitted to be settled, squared off or closed out.
MIIs shall ensure that they communicate the details of the deactivation along with reasons thereof to the respective registered intermediary.
Subject to the above, the MIIs shall ensure that the deactivated accounts are not used for dealing in securities market in any manner whatsoever.
Further, the concerned entity can anytime place a request to the registered intermediaries with which the entity holds trading/demat account with necessary documents.
The concerned MII shall re-activate all trading accounts/demat accounts of entity after ensuring that entity has provided signed acknowledgement of SEBI and confirmation on KYC records has been received from registered intermediary.
The process of reactivating the accounts by the MIIs shall not exceed more than 5 working days after receipt of request from the entity.
This circular is applicable to all Recognised Stock Exchanges (except Commodity Derivatives Exchanges) and Registered Depositories.
Link to the Circular:
https://www.sebi.gov.in/legal/circulars/jul-2022/framework-for-automated-deactivation-of-trading-and-demat-accounts-in-cases-of-inadequate-kycs_61407.html
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