Sebi Takes Stock of Aadhaar Linkage

Sebi Takes Stock of Aadhaar Linkage

Seeks feedback from exchanges on brokers' preparedness to get clients' IDs by December 31

The Securities and Exchange Board of India has set the ball rolling for making Aadhaar compulsory for stock trading. The markets regulator has asked exchanges for their feedback on brokers' preparedness to get their clients to submit the biometric IDs before December 31.

ET reported first on August 10 that Aadhaar would become mandatory for buying shares and mutual funds. The BSE, in a recent circular, asked brokers for their comments on the matter by August 23.It said existing clients will have to submit Aadhaar numbers to their brokers by December 31. New clients should do so within six months of opening demat account.

“In case of failure to submit the documents within the aforesaid time limit, the account shall cease to be operational till the time Aadhaar number is submitted by the client,“ the circular said.

The government and Sebi are making Aadhaar must as part of the Prevention of Money Laundering rules, which aim to curb illegitimate money . Sebi, in recent years, has cracked down on individuals and entities for using the stock exchange platform to convert illegal money into legal money . Currently , the income tax permanent account number (PAN) is considered the most important document for share transactions. But the government has realised that PAN, though unique for every individual for income tax assessment, may not be enough to plug money laundering through the stock market. Market participants said multiple PANs and fake demat accounts are being used to push illegal money into the stock market.

The government recently mandated that Aadhaar be linked to PAN, bank accounts and mobile phone numbers.

Brokers said they are gearing up for implementing Aadhaar but it would be a tedious task.

“It adds to additional cost for brokers but they have no choice but to comply with it,“ said Alok Churiwala, managing director at Churiwala Securities.“This is triplication of efforts as without demat, bank account and PAN, one cannot trade and these three are already mandated to be linked to Aadhaar.“

For large retail broking firms like Angel, it would be a logistical nightmare.

“The issue is that clients don't respond to SMSes, emails, etc. So, it takes a lot of effort to get this done,“ Angel Broking chief executive Vinay Agrawal said.“Customers have already linked Aadhaar with PAN and bank account but due to privacy or confidentiality issues these agencies don't share the details and we have to approach the customers. As brokers, we don't have a choice but the regulator has given us enough time.“

The Economic Times, New Delhi, 21st August 2017