India’s Financial Watchdog Eases Account Opening Process for Investors

Investors in India’s domestic stock market will benefit from improved account opening procedures. The Securities and Exchange Board of India (SEBI), the main regulator for financial markets, has issued a notification informing participants of simplified account opening procedures for investors.

Under the new guidelines, certain information such as, gross annual income details, occupation, permanent address proof and whether the applicant is a politically exposed person, will not be required. SEBI regulated firms will have six months from the notification date to comply with the new norms.

Salaam Khan, a Hyderabad-based broker commented to Forex Magnates: "The brokerage sector is becoming very competitive with the top players cutting fees and commissions, price sensitive customers will find it easy to migrate from broker to broker under the new guidelines."

Investors in India are faced with a spree of documentation when setting up a new account, with each broker having their own version of the account opening form. SEBI’s efforts over the last two years have been to synchronize the procedure to make it easier for investors to choose any broker to trade with, without the hurdles of lengthy account opening documentation.

Details from the circular state: "It has now been decided in consultation with various market participants to shift certain information (gross annual income details, occupation, permanent address proof and whether the applicant is a politically exposed person) of part I to part II of the AOF."

Indian investors' data is held centrally under an agency known as the KYC Registration Agency, which was formed in 2011 and is authorized by SEBI. The agency collates all client information and stores it in a single database. SEBI registered firms who onboard new clients have access to the database and can retrieve client information.

The KYC Registration Agency plays an important role in India's growing domestic marketplace, where there are believed to be over 20 million investors participating in the securities market. On its website, the KYC Registration Agency explains its functionality: “Investor has to complete the KYC process as and when they interact with each type of SEBI Intermediaries by submitting the relevant documents, requirements of which may vary from intermediary to intermediary. This has put on the investors many hardships. With a view to eliminate such duplication of KYC process to be executed by the investors and to have uniform KYC process across SEBI registered intermediaries, SEBI has introduced the concept of KYC Registration Agency (KRA).”

Not only does the KYC Registration Agency provide simplicity for investors looking to trade with multiple brokers, it also ensures client data is up-to-date and reduces market abuse activities such as insider dealing.