Sebi Allows KYC Agencies To Share Client Information With IFSCA-Regulated Entities – What It Means

The Securities and Exchange Board of India (Sebi) has allowed KYC Registration Agencies (KRAs) to share client information with entities regulated by the International Financial Services Centres Authority (IFSCA), in a step aimed at improving interoperability and reducing duplication in the KYC process.

In a circular dated August 20, Sebi allowed IFSCA-regulated entities to access the KRA system under Regulation 16A(1) of the Sebi KYC Registration Agency Regulations, 2011. This will help them use existing KYC information while providing financial services to clients.

The step brings IFSCA-regulated entities into the information-sharing framework already available to entities regulated by other financial sector regulators.

Regulation 16A(1) states, “The entities, regulated by other regulators in the financial sector specified by the Board from time to time, may access the system of KRA for undertaking KYC of their clients who engage them for financial services.”

Under the circular, entities accessing the KRA system will have to comply with the provisions of the Sebi KRA Regulations. They will also have to follow Sebi's Master Circular on Know Your Client (KYC) norms for the securities market dated October 12, 2023, along with subsequent amendments.

For clients registered as Foreign Portfolio Investors (FPIs), IFSCA-regulated entities accessing the KRA system will also have to follow Sebi's data security guidelines for FPIs, Designated Depository Participants and Eligible Foreign Investors.

Sebi said the decision is intended to “enable interoperability and to facilitate sharing of information” between Sebi-registered KRAs and entities regulated by IFSCA.

The provisions of the circular have come into force with immediate effect.

Why It Matters

KRAs maintain centralised KYC records that allow financial market intermediaries to verify client information without asking investors to repeatedly submit the same documents. Sebi has been working towards reducing repetitive KYC requirements and making investor onboarding more seamless. Its latest annual report noted that the unified KYC framework through KRAs has reduced duplication and made access more seamless.

The latest move extends this framework to entities operating under IFSCA's regulatory jurisdiction. It could make the onboarding process smoother for clients using financial services in the International Financial Services Centre, while giving regulated entities access to an existing KYC infrastructure.

The circular also makes clear that access to KRA information will not mean a relaxation of KYC or data security requirements. Entities using the system will remain subject to the applicable Sebi KRA framework, while additional data security requirements will apply where the client is an FPI.

Sebi said the circular was issued under Section 11(1) of the Sebi Act, 1992, read with Regulation 16A(1) of the Sebi KRA Regulations, with the stated objective of protecting investors and promoting and regulating the securities market.