SEBI does away with physical filing of KYC documents to KRAs

The intermediaries would need to submit scanned copies of investor documents to the KRAs and retain the physical documents with themselves. However, physical documents would need to be submitted, whenever KRAs demand them

Market regulator Securities and Exchange Board of India (SEBI) has done away with the submission of physical documents by investors to the KYC Registration Agencies (KRAs) in favour of the electronic format only. The move is seen as an attempt to streamline the process of “Know Your Client” (KYC) procedures.

 

The intermediaries, including mutual funds, would need to submit scanned copies of investor documents to the KRAs and retain the physical documents with themselves.

 

However, the physical documents would need to be submitted, whenever KRAs demand them.

 

So far, KRAs—which are responsible for maintaining KYC records across all SEBI-regulated entities—were required to maintain the original KYC documents, both in physical as well as electronic formats.

 

To minimise the physical paperwork, SEBI has now amended its KRA regulations, allowing the market intermediaries to keep the original investor documents in physical form with them and submit only the scanned copies to the KRAs.

 

“The intermediary shall perform the initial KYC/due diligence of the client, upload the KYC information with proper authentication on the system of the KRA, furnish the scanned images of the KYC documents to the KRA, and retain the physical KYC documents,” SEBI said.

 

Even in cases of any change in investor KYC details, the market intermediaries would retain the updated documents in physical form with themselves.

 

As per the new norms, all market intermediaries and agents (RTI and STA) acting on behalf of mutual funds would also have to submit only scanned KYC documents to KRAs.

 

However, the intermediaries and mutual funds would have to furnish the physical KYC documents or authenticated copies, whenever desired by the KRAs, SEBI said.

User

COMMENTS

Nilesh KAMERKAR

4 years ago


Instead of sending the documents to the KRAs; these are to be held with the intermediary to be submitted later on demand.

Documentation process remains as it is.

How does this simply the KYC procedure?

Nifty, Sensex will try to move higher: Monday Closing Report

If the Nifty holds today’s low and closes above 5,675, the market will head higher
 

The market settled lower as continued political uncertainties at the Centre ignited fresh worries about fate of the fiscal reforms of the government. If the Nifty holds today’s low and closes above 5,675, the market will head higher. The National Stock Exchange (NSE) reported a volume of 68.24 crore shares and advance-decline of 567:971.

 

The Indian market opened in the positive on supportive global cues and assurance by finance minister P Chidambaram on Saturday that the government would relax rules for foreign investors in government and corporate bonds next month. Markets in Asia were mostly higher as Cyprus managed to broker a deal with international lenders, thus avoiding a collapse of its banking system.

 

The Nifty opened 56 points higher at 5,707 and the Sensex gained 158 points over its previous close to resume trade at 18,894. Buying in realty, consumer durables, oil & gas and state run companies helped the market hit its intraday high in initial trade itself. At this point the Nifty touched 5,718 and the Sensex rose to 18,950.

 

Profit taking at higher levels saw the benchmarks paring part of their gains and trading sideways in the morning session. The indices continued to remain range-bound in noon trade as optimism from the global markets boosted investor sentiment back here.

 

However, the market which started the day on a firm note sank into the red around 2.00pm as political tensions came to the fore once again. The Samajwadi Party threatened to withdraw support to the UPA government at the Centre. Concerns of an early election derailing the reforms push worried investors. The development led the benchmarks to their lows in the last hour of trade. The Nifty fell to 5,624 and the Sensex went back to 18,655 at their respective lows.

 

Erasing all its gains in the late session, the market closed in the negative for the seventh day in a row. The Nifty fell 18 points (0.31%) to 5,634 and the Sensex closed the session at 18,681, down 54 points (0.29%).

 

The broader indices underperformed the Sensex today, as the BSE Mid-cap index declined 0.32% and the BSE Small-cap index dropped 0.80%.

 

The top sectoral gainers were BSE Realty (up 0.79%); BSE Power (up 0.56%); BSE Oil & Gas (up 0.49%); BSE Consumer Durables (up 0.43%) and BSE PSU (up 0.20%). The main losers were BSE Capital Goods (down 1.44%); BSE Auto (down 0.78%); BSE Metal (down 0.71%); BSE Bankex (down 0.66%) and BSE Fast Moving Consumer Goods (down 0.41%).

 

Nine of the 30 stocks on the Sensex closed in the positive. The major gainers were ONGC (up 2.96%); NTPC (up 2.04%); HDFC (up 1.16%); Dr Reddy’s Laboratories (up 0.77%) and Hindustan Unilever (up 0.72%). The chief losers were Hero MotoCorp (down 2.42%); Tata Steel (down 2.28%); Larsen & Toubro (down 2.19%); Bharti Airtel (down 1.95%) and GAIL India (down 1.94%).

 

The top two A Group gainers on the BSE were—GMR Infrastructure (up 9.52%) and Essar Oil (up 8.44%).

The top two A Group losers on the BSE were—MMTC (down 4.93%) and Unitech (down 4.18%).

 

The top two B Group gainers on the BSE were—Filatex India (up 20%) and KEW Industries (up 18.50%).

The top two B Group losers on the BSE were—Wim Plast (down 19.77%) and Gennex Laboratories (down 19.27%).

 

Of the 50 stocks on the Nifty, 20 ended in the green. The key gainers were DLF (up 5.04%); NTPC (up 2.05%); BPCL (up 2.04%); Power Grid Corporation (1.76%) and ONGC (up 1.74%). The top losers were Bank of Baroda (down 2.81%); Hero MotoCorp (down 2.75%); L&T (down 2.57%); Tata Steel (down 2.52%) and IDFC (down 2.34%).

 

Markets in Asia, with the exception of the Shanghai Composite, closed in the green following the positive outcome of the Cyprus bailout deal. The deal clears the way for 10 billion euros ($13 billion) of emergency loans and moves Cyprus toward avoiding the threat of default.

 

The Hang Seng advanced 0.61%; the Jakarta Composite surged 1.16%; the KLSE Composite climbed 1.04%; the Nikkei 225 jumped 1.69%; the Straits Times gained 0.385; the Seoul Composite surged 1.49% and the Taiwan Weighted settled 0.77% higher. Bucking the trend, the Shanghai Composite shed 0.07%.

 

At the time of writing, the key European indices were trading with gains between 0.87% and 1.67% and the US stock futures were in the positive, indicating a green opening for US stocks later in the day.

 

Back home, institutional investors—both foreign as well as domestic—were net sellers in the equities segment on Friday. While FIIs pulled out Rs14.20 crore from stocks, DIIs withdrew Rs135.57 crore on the same day.

 

Pharma major Venus Remedies today announced launch of its stress reliever over the-counter (OTC) product ‘Ezenus’ in domestic market, aiming to capture 5% of $100 million market in the stress segment within the next three years. The stock fell 0.74% to close at Rs240.90 on the NSE.

 

Fertiliser and seeds company Zuari Agro Chemicals today said it has shut down its plants for scheduled annual maintenance. The company has a manufacturing facility at Goa, with four plants dedicated to manufacturing of urea, DAP and NPK based fertilisers. The stock declined 4.94% to close at Rs147.25 on the NSE.

 

Cairn India today began natural gas sales from its prolific Rajasthan block on borders with Pakistan even as it put another oilfield in the area on production. Cairn and its 30% joint venture partner ONGC will initially produce about 5 million standard cubic feet per day (0.15 million metric standard cubic meters per day) of gas, which will go up to a maximum of 1 mmscmd by next year. The stock shed 0.04% to close at Rs277.20 on the NSE.

User

Curbing manipulation in illiquid stocks: Another harebrained idea by SEBI?

SEBI’s new regulation on illiquid stocks will have an adverse impact on equity markets in India and could alienate current and future investors

Illiquidity in many micro- and small-cap stocks has always been of a serious concern to the small Indian investor and is one of the reasons why manipulation is so rampant. The Bombay Stock Exchange (BSE) houses a lot of such companies but both SEBI (Securities and Exchange Board of India) and BSE do nearly nothing about it. SEBI has finally come up with a harebrained idea to combat manipulation by taking action on illiquid stocks which will take effect from 1 April 2013.
 

SEBI, India’s securities market watchdog, may have shot itself in the foot yet again, when it plans to regulate illiquid stocks. Its earnest effort to curb manipulation, while laudable, may have damaging effects on the long term future of Indian equities market. Vide the circular CIR/MRD/DP/6/2013, issued on 14 February 2013, it plans to introduce trading through periodic call auction for illiquid scrips.
 

SEBI’s has taken the term illiquidity to a whole new level. According to the watchdog, an illiquid stock is a stock that satisfied one or more of the following criteria:

1. The average daily trading volume of a scrip in a quarter is less than 10,000;

2. The average daily number of trades is less than 50 in a quarter;

3. The scrip is classified at illiquid at all exchanges where it is traded.

 

Let us assume that a stock XYZ is quoting at Rs500. So, in order for it to be a ‘liquid’ stock, it ought to have an average trading value of Rs50 lakh (Rs500 x 10,000; assuming share price does not move). However, on the other hand, if the share price of another stock, say PQR, is valued 50 paise, then the average value is Rs5,000 (0.50 x 10,000). It must be noted that majority of the manipulation happens in the micro-cap segment (and are often called “penny stocks”). This means a stock valued at 50 paise has a higher probability of being rigged than a stock valued at Rs500. After all, a promoter or market player needs just Rs5,000 to influence the price in the normal market and make it ‘liquid’. Remember, sometimes even great and well-run companies can be illiquid. So, if well-run companies are put into a separate trading bracket, there will be a stigma or label attached to them.

 

For a long time, Moneylife has been covering stocks on manipulation, especially those stocks which tend to be ‘illiquid’ under SEBI’s current criteria. You can check out the Unquoted section in our Moneylife magazine every fortnight. You can also check it on our website over here. We even carried an exclusive cover story last year devoted to stock price manipulation and how ineffectual our market regulators have been. We had found out that regulators and exchanges had not even taken action on errant companies, even those who have committed blunders in the past. Sometimes, all it requires is basic monitoring skills to nab such companies. SEBI has, instead of tackling the problem on manipulation head-on and investigating each situation on a case-by-case basis by using its expensive (funded by taxpayers’ money) so called IMSS surveillance system, targeted ‘illiquid’ stocks.
 

More pertinently is what could possibly happen during the call auction. According to the circular, it states: “The call auction duration shall be one hour, of which 45 minutes shall be allowed for order entry, order modification and order cancellation, eight minutes shall be for order matching and trade confirmation and remaining seven minutes shall be a buffer period for closing the current session and facilitating the transition to next session. The session shall close randomly during the last one minute of the order entry between the 44th and 45th minute. Such random closure shall be system driven.”
 

What happens during the eight minutes is crucial. There is bound to be frenetic trading coupled with quick order modification and such. It is very difficult to skillfully place an order within a short frame of time let alone modify it. Some brokers may even refuse to trade in such scrips fearing that market regulators will be onto them for rigging. Some may even decline their customers’ orders on similar grounds. A combination of all this will exacerbate the liquidity scenario. This is also antithesis of free market capitalism where brokers and customers are free to place an order at their time of liking instead of the stipulated eight minute window.
 

According to the circular, it was SEBI’s Secondary Market Advisory Committee (SMAC) who came upon the call auction idea. The circular states: “SMAC also made recommendation on the introduction of trading through periodic call auction mechanism for illiquid scrips in the equity market.” Once this regulation is put into force, the most affected party will be BSE where majority of the thinly traded stock takes place.
Ashishkumar Chauhan, managing director and chief executive officer of BSE, sits on the SMAC committee. According to SEBI website, the SMAC committee consists of the following ‘experts’ who advocated this scheme:
 

  • Prof  Jayanth R Varma, IIM Ahmedabad chairman
  • Ms Chitra Ramakrishna, Joint MD, NSEIL
  • Shri Ashishkumar Chauhan, MD & CEO, BSE
  • Shri CS Mohapatra, Advisor(FSDC), ministry of finance
  • Dr Shashank Saxena, Director (BO‐II & Pension), ministry of finance
  • Shri Surinder Verma, Chairman, Citizens Awareness Group
  • Ms Susan Thomas, Indira Gandhi Institute of Development Research (IGIDR)
  • Dr Vikram Kuriyan, Professor of Finance, ISB, Hyderabad
  • Shri BK Sabharwal, chairman, FISE
  • Shri MD Mallya, ex-chairman, Bank of Baroda
  • Shri PS Reddy, MD & CEO, CDSL
  • Shri Jayesh Sule, executive director, NSDL
  • Shri Rakesh Somani, president, ANMI
  • Shri S Ramann, executive director, Market Regulation Department, SEBI
  • Shri PK Nagpal, executive director, Market Intermediaries Regulation and Supervision Department, SEBI

Ms Maninder Cheema, deputy general manager, Market Regulation Department, Division of Policy, SEBI

User

COMMENTS

rangan v

3 years ago

please note that i had taken special int and written to ministry and asked them to apply their mind nobody knew hwere to adress the problem and everybidy adressed the problem to sebi who is the creator .we have lost all faith in sebi sebiand so called smac comittee did more harm to investrors and for the last 9 months we suffred every time i call sebi they all direct the call to mnaider chemma who does not know anything .really funny i think we have to take severe action against the offficrs responsible for this circular and did not apply the mind .now sebi is also vigorusly working for delisting of shares by sevral companies for obvious reasons in the bargain allwill lose govt also loses by way of service tax sebi way of their tyranasaction chrgs and stamp duty .why the foreign companies should take all profit themselves then there ought to be diff taxation .sebi is doing all wrong things and goes on corecting se now sebi is issuing orders no rating is reqd that means the damage done by the looting co runs into crores .chidambaram says no retail participation how can there be all inv have lost faith in sebi it is high time sebi should be abolished and since it is a child of manmohan singh who called the banking scam as security scam and who is also on his way out in few months .

CA PRADEEP AGARWAL

3 years ago

I had pointed out previously regarding the pit falls but I feel straight talk is not needed

rangan v

3 years ago

there was absolutely no application of mind on the prt of the comitte .first in equity mkt there are face value of shares of re1 rs 2 rs 5 rs 10 rs 25 rs 50 and rs 100 and there is lot of diffrence between re1 traded average 10000 shares for the qtr and rs 100 or rs 10 traded for a qtr which is the basis.and also the capitla of the company also matters .sebi which was formed for the purpose of protecting small inv actaully working for rogue promoters sebi is having and getting lot of money by way of fund transfer from bse and nse .assume trai does not get any money if each call is made and irda does not get any money if we take insurance policy whereas if we trade in the mkt a part money every day goes to sebi and natuarally it is becoming more paowerful then cbi rangan [email protected]

REPLY

Dayananda Kamath k

In Reply to rangan v 3 years ago

they are working to a plan so that only fiis will rule the market.only those shares that are traded by fiis will be traded in indian market.govt is also interested in protecting fiis interest. when you passed a law to negate supreme court judgement and then allow negotiating for tax assesment. it may be a ploy to collect election funds.

Dayananda Kamath k

In Reply to rangan v 3 years ago

they are working to a plan.they want only fiis to trade in indian markets and drive away small investors from the market so that selling the country to foriegners will be easy.

Abhay Munot

4 years ago

I think CA PRADEEP AGARWAL came up with the right idea of taking this matter to SEBI instead of just fuming about it. I have already written a letter to the SEBI officials mentioned in the article above with a copy to SEBI chairman. I would urge everyone to do the same so SEBI realizes that it cannot take the investors for granted.

The contact info for SEBI officials can be found here: http://www.sebi.gov.in/OrgChart.html

Investor

4 years ago

I am a fundamental long term investor in stocks. These new rules have made it EXTREMELY cumbersome and arduous for me to place orders in stocks which have been brought under the so called `call auctions`. My broker, HDFC Securities, has stopped letting investors place orders online for these companies. They say that I would have to call them up to place such orders. On top of that, I now understand that if my order does not get executed in a particular 1 hour session (which is quite likely because of the overall low volumes in these companies), I need to place my orders again the following hour. If I want to buy shares in 5 companies, it means calling them up 5-6 times a day and replacing 5 orders each time. Which means I can do no fundamental research the whole day. My time will just be dedicated to calling brokers and replacing orders. This a huge and uncalled for problem. Thanks SEBI!! These rules make it very difficult and time consuming for investors buy/sell such stocks. SEBI`s policy making team really needs an overhaul. These rules will just lead to me to try to avoid such stocks even though the research might lead one to the conclusion that a particular company might be a fundamentally sound and profitable company for me as an investor. The costs for genuine investors of this new policy far far outweigh any perceived benefits it might have. It should really be scrapped IMMEDIATELY!!

REPLY

CA PRADEEP AGARWAL

In Reply to Investor 4 years ago

All should assemble at INVESTOR's FORUM and file a petition with Supreme Court to correct the anamoly, these fellas have taken everything for granted.

Abhay Munot

In Reply to CA PRADEEP AGARWAL 4 years ago

I think CA PRADEEP AGARWAL came up with the right idea of taking this matter to SEBI instead of just fuming about it. I have already written a letter to the SEBI officials mentioned in the article above with a copy to SEBI chairman. I would urge everyone to do the same so SEBI realizes that it cannot take the investors for granted.

The contact info for SEBI officials can be found here: http://www.sebi.gov.in/OrgChart.html

Investor

4 years ago

What is SEBI thinking? This will just kill genuine investor interest in these stocks. They have now become so hard difficult to buy and sell. Even if one assumes that these 'call auctions' will decrease price manipulation, this policy is doing so much more harm then good. Its like in trying to curb 5% of manipulators, you are going to also punish the rest of the 95% investors. How can I keep checking every one-one hour to see if my orders have gotten executed or not, and then keep placing them again with brokers? This is crazy. SEBI needs a psychiatrist!!

This is like the police suddenly one find day coming up with the rule that to curb crime in India, we should allow people to exit their homes and walk on the streets for only 15mins every hour! Even if one assumes that this will actually decrease the crime rate, look at the damage it will do in the process!!!

ABSOLUTE MADNESS as and excuse for policy making SEBI.

REPLY

CA PRADEEP AGARWAL

In Reply to Investor 4 years ago

Have they at anytime favoured genuine investors, they have killed the market, see its condition, CORRUPTION IS RULING THE ROOST.

CA PRADEEP AGARWAL

4 years ago

Do not know what SEBI is upto. inspite of that, the reputation of SEBI, but, actually of CG has taken a severe beating then to foolish decisions favouring gunny bags are being taken.

REPLY

Bosco Menezes

In Reply to CA PRADEEP AGARWAL 4 years ago

Sadly, public comment was not invited in this case, which impacts the interests of a large segment of the investing public in India.

CA PRADEEP AGARWAL

In Reply to Bosco Menezes 4 years ago

Today they are untouchables

CA PRADEEP AGARWAL

In Reply to Bosco Menezes 4 years ago

Have you seen My Dear, that today they are maintaining distance from AAM AADMI, they think only of moneybags as said previously also and have lost all reputation /goodwill, for which they don't care.

Bosco Menezes

4 years ago

Got a shock today as HDFC Securities with which i have my online trading account is not allowing online trading in these "illiquid" scrips !!

I rang the Customer Care number of HDFC Securities & the representative informed me that such scrips can no longer be traded through on-line trading, they have to be traded via tele-broking (call-n-trade) !!

Whether this is a permanent situation, or temporary, the representative could not say. So i have written to the customer care email id asking this question, and for resolution to this problem. Got an automated reply that they will get back within 1 business day.

Anyway, looking at the trading in these iliquid scrips today, it does seem like even the existing liquidity has been curtailed. Whether this will improve after people get used to the new system is to be seen. In 3-6 months we will know for sure.

REPLY

CA PRADEEP AGARWAL

In Reply to Bosco Menezes 4 years ago

Feel, another caucus in the making.

Bosco Menezes

4 years ago

In those 2050 stocks, the few dozen that are actually being manipulated are the ones that have a chance of coming out of the list in future, as the manipulators will ensure the trading criteria is met. For the rest, liquidity will fall further, as investors may well avoid these stocks. So the non-manipulated stocks (vast majority) will stay in the list for a long time, barring a change in criteria.

REPLY

CA PRADEEP AGARWAL

In Reply to Bosco Menezes 4 years ago

I will say BANKS should be beware? take urgent steps

Bosco Menezes

4 years ago

List is out on BSE. Here is the notice : http://www.bseindia.com/markets/MarketIn...


2050 companies have made it to the "periodic call auction" / illiquid list (more than 1/3rd of listed universe)!!

Dayananda Kamath k

4 years ago

today regulators and govt has become the biggest market manipulators in indian stock market. the best example is just before ntpc share sale the egom asked delhi govt to reimbruse 2500 od crore rupees to ntpc. no action so far which might have been done just to get better price for the share. anyway the other arm lic with policyholders fund is ready to bail out all the issues.that also insider trading. and recent rcf issue without informing about the effect of gas policy. who is the looser it is general public their premiume money and tax money is being squandered to impliment direct cash to poor to buy votes and line their own pockets.

REPLY

CA PRADEEP AGARWAL

In Reply to Dayananda Kamath k 4 years ago

100% CORRECT, but what to do power mongers now have no faith in Journalists or media churning out the news-not afraid of anyone.

Dayananda Kamath k

4 years ago

funniest part of the rule is if you buy back the share at higher than your sale price then you will be penalised. that means if you have short sold the share and market moves against you you will incur a loss and you will also penalised. so for your wrong decision on market you will be penalised twice which is actually illigal.by these rules sebi wnats to make well run companies also a penni stock and penni stocks the multibaggers.may be market making for previlaged ones. or is it ploy to increase volumes in stock exchanges.you make the basic rules for trading and allow unintrupted trade without stockexchange indued sebi induced trade. or it may be another way of driving out local investor so that entire market is ruled by fiis and bigboys.

Bosco Menezes

4 years ago

"Throw out the baby with the bath water" is an idiomatic expression used to suggest an avoidable error in which something good is eliminated when trying to get rid of something bad, or in other words, rejecting the essential along with the inessential.

In the current context, we can change the idiom to "Throw out the Investor along with the Manipulator" .

I am tempted to say "Quintessentially SEBI". But that may be unfair, as of late they HAVE done some good things too - like in the Sahara case (just my opinion).

REPLY

CA PRADEEP AGARWAL

In Reply to Bosco Menezes 4 years ago

My Dear Manipulator is the bread and butter of those in power

Bosco Menezes

4 years ago

Few days left to go before the new rules take effect. If SEBI really wants to achieve their purpose (check manipulation) the CORRECT way, they should make the new rules applicable to genuinely dubious stocks - not just stocks that happen to be illiquid.

At any point of time, there are find few dozen scrips which have risen 5X-10X-20X or more in previous months, with NO change in funda's - ie. they are doing either negligible business (negligible revenues/profits), or even if they are doing some business, there is NO significant change in revenues / profits , or no material news in investor domain to justify the rise in scrip prices. THESE are the obviously manipulated scrips. THESE are the scrips that should be put in "periodic call auction" category, though they may not be "illiquid" precisely because of the manipulation.

Whether to save themselves the bother of identifying the manipulated scrips, or otherwise, SEBI seems to have come out with this "short cut" method , without thinking it through, or asking for public comment. And crores of investors invested in small-caps will face the brunt.

PS : If one reads MoneyLife magazine, in every issue they highlight couple of such scrips. THESE should be the scrips put into this new mechanism.

CA PRADEEP AGARWAL

4 years ago

Actually what I have observed that MLF is coming out with good articles but for some you have to become PREMIUM members without which you cannot read the article

REPLY

Bosco Menezes

In Reply to CA PRADEEP AGARWAL 4 years ago

I dont think you are right, sir. I have not noticed any article being blocked for access.

Sucheta Dalal

In Reply to Bosco Menezes 4 years ago

Mr Agarwal is correct. Earlier, we used to upload the magazine on the website FREE OF COST - after it was 2 issues old.
Now we have made all that content premium. We cannot afford to run an organisation where the product is free. People can subscribe to Moneylife. There are 2 options. A regular subscription, with Net access for all content. Or a monthly pass for Rs99 .

Bosco Menezes

In Reply to Sucheta Dalal 4 years ago

Thanks, Sucheta. Duly noted. Being a subscriber, i had not noticed teh same.

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