Make KYC norms non-mandatory: FPIs’ lobby group tells Sebi

The industry body has requested the regulator to permit updation of landline numbers of the officials instead of mobile numbers

FPIs | SEBI | Securities and Exchange Board of India

The Asia Securities Industry and Financial Markets Association (Asifma), a lobby group for foreign portfolio investors (FPIs), has written to the Securities and Exchange Board of India (Sebi) reiterating the difficulties involved in disclosing KYC attributes such as mobile number, email and income details to depositories.

The requirement to disclose the six KYC attributes — also including name, address, and PAN — were earlier made mandatory for new accounts from June 1, but have been postponed by a month.

The details have been sought in a bid to curb round tripping and money laundering, and failure to obtain these attributes by the deadline may result in blocking of accounts of foreign investors.

Asifma has requested that some of the key attributes be made non-mandatory for institutional clients serviced by custodians.

“For some of the attributes where information is available the details are updated against the beneficial owner account while some attributes are not available and clients are reluctant to provide information due to data confidentiality issues and asset protection concerns,” Asifma said in a note.

Name, address, and PAN information, for instance, are already available and updated against the respective accounts, it said.

The industry body has requested the regulator to permit updation of landline numbers of the officials instead of mobile numbers. “Many international investors have protocols in place for usage of mobile phones and do not permit sharing of personal mobile numbers for official purposes. Foreign investors have concerns with regard to capture of this information in the context of data privacy under their own regulations,” it said, adding that sharing of personal numbers can also become an issue when an employee quits and his details remain in official records.

At present, the email id of the custodian is updated against the account, given the inherent nature of the custody set-up. This ensures that notices received from issuers are monitored and captured accurately by the custodians. For FPIs and FVCIs the compliance officer details are available as part of their registration requirement, Asifma said.

The industry body has also requested Sebi to make the requirement of sharing income range non-mandatory. “This information is available as part of depository KYC form for all institutional investors, except FPIs, and are captured at the time of account opening. For FPIs, the CAF (common application form) is applicable which captures gross income details instead of income range and is a non-mandatory field,” Asifma said.

Last week, custodians had met the regulator and specifically highlighted the difficulty in sharing the mobile number of investors and income range due to data confidentiality and asset protection concerns.

For instance, sovereign wealth funds and pension funds – that are not audited and do not disclose their income in their home jurisdiction – will be especially unwilling to do so in a foreign jurisdiction, custodians had told Sebi.

The six attributes to be shared are in addition to details of tax residency, nationality, and beneficial ownership information that has to be furnished by foreign investors at present.

Onerous task

  • New KYC requirement includes attributes such as name, address, PAN, mobile number, email id and income range
  • Point box second point: Deadline for furnishing info extended to July 1
  • All six KYC attributes mandatory for new accounts
  • Custodians have to update requisite attributes for existing accounts
  • Clients reluctant to furnish this information owing to data confidentiality concerns

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