Sebi tightens KYC registration agency exit norms: A summary of timelines, SOP, other major changes

Here are 10 things to know about the SEBI circular defining these rules: 

• According to the capital market watchdog, this action was necessary to deal with KRAs’ voluntary exits due to business decisions as well as involuntary ones triggered by financial stress or regulatory action.
• “It is decided that the process for surrender of KRA registration should be streamlined for voluntary/involuntary scenarios so that critical operations and services of KRA are wound down in an orderly manner,” noted SEBI.

Data transfer and investor protection

• Under the new rules, any KRA surrendering its registration will be required to transfer all KYC records to another registered agency without any data loss or the need for fresh KYC. 
• Each KRA must have a board-approved standard operating procedure (SOP) covering data migration, service continuity and investor protection.
• The exiting entity must also set up an oversight committee to monitor the winding-down process, and continue to operate an investor helpdesk for 12 months to handle queries.

Tight timelines for compliance

• The regulator has specified strict timelines for the process: intimation to SEBI within 7 days, stakeholder communication within 14 days, data transfer within 60 days, closure and audit within 75 days, and a final report within 90 days.

Regulatory safeguards in involuntary cases

• In cases where the exit is involuntary, SEBI has reserved powers to appoint a temporary administrator or designate another KRA to take charge, while retaining flexibility to override timelines, if needed.
• The regulator said these measures will ensure smooth transition of KYC services, protect investors, and maintain integrity of the overall system.

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• In cases of involuntary exit, Sebi can appoint a temporary administrator to manage operations.Alternatively, Sebi may designate another KRA to take charge of services.
• The regulator has also retained flexibility to override timelines, if needed. These measures are aimed at ensuring smooth transition of KYC services, protecting investors, and maintaining system integrity.