Legal Entity Template Rolled Out by SEBI

On 10.03.2021, the Securities and Exchange Board of India (SEBI), by way of the powers provided under section 11 (1) of the SEBI Act 1992, has rolled out a Legal Entity Template. The same was notified through SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2021/31.

As per this circular, the market regulator SEBI has asked the RIs (Registered Intermediaries) to upload the KYC (Know Your Customer) data concerning accounts of LEs (Legal Entities), which are opened on or after 1^st April, onto the CKYCR (Central KYC Registry).

Further, it shall be noted that the Registered Intermediaries have already been furnishing the KYC data concerning individuals’ accounts that are opened on or after 01.08.2016 onto Central KYC Registry.

Eligible Intermediaries for SEBI Circular on Legal Entity Template

The intermediaries eligible for SEBI Circular on Legal Entity Template are as follows:

• All the Recognized Stock Exchanges (RSEs);
• All the Recognized Depositories;
• Stock Brokers through the Recognized Stock Exchanges;
• Depository Participants through Recognized Depositories;
• Association of Mutual Funds in India (AMFI);
• All the Mutual Funds and AMCs (Asset Management Companies) through AMFI;
• Portfolio Managers;
• KYC Registration Agencies (KRAs);
• Qualified Registrar to an Issue & Share Transfer Agents (QRTAs);
• Alternative Investment Funds (AIFs);
• Collective Investment Schemes (CIS);
• Custodians;
• Investment Advisors;

However, it shall be taken into due consideration that the provision of this SEBI Circular will not be applicable to Foreign Portfolio Investors (FPIs).

Also, Read: Guidelines for Votes Cast by Mutual Funds Prescribed by SEBI

Need for Legal Entity Template

Earlier, the Central KYC Registry is fully operational for individual clients. However, now it has been decided to extend the same to legal entities as well

Consequently, Registered Intermediaries will need to upload the KYC records and data of the accounts of Legal Entities, opened on or after 01.04.2021. Also, it shall be noted that the same will done in accordance with the provisions of Rule 9 (1A) of the Prevention of Money Laundering (Maintenance of Records) Rules 2005.Therefore, in this regard, the securities market regulator, i.e., has come out with a legal entity template.

Key Directions for Registered Intermediaries

The key directions for Registered Intermediaries by this SEBI Circular can be summarised as:

• All the Registered Intermediaries need to ensure that in the case of LE accounts, which are opened before01.04.2021, the records concerning KYC requires to be uploaded onto Central KYC Registry when the updated KYC details are obtained or received from the client. Also, RIs need to confirm that during the receipt of updated information, the client’s KYC details are migrated to the current CDD (Client Due Diligence) standard;
• Further, to confirm that all the existing KYC records of individual clients are incrementally furnished onto the Central KYC Registry, RIs will upload the KYC records and data concerning the accounts of individuals opened before01.08.2016, as and when the updated KYC details are obtained or received from the client;
• Where a client intents to found an account based relationship, then, in that case, he/ she requires to furnish a KYC Identifier to a Registered Intermediary, with clear consent to download records from the Central KYC Registry. After that, the Registered Intermediary will retrieve the KYC records online from the Central KYC Registry using the KYC Identifier. Also, it shall be noted that the client will not be required to furnish the same KYC records or data or any other supplementary identification documents or information unless there is some change in the information or details of the client as prevailing in the records of the Central KYC Registry;
• Once a KYC Identifier is generated by the Central KYC Registry, the Registered Intermediaries will ensure that the same is duly communicated to the individual or legal entity.

Conclusion

In a nutshell, based on the powers provided under section 11 (1) of the SEBI Act 1992, the capital market regulator, i.e., SEBI has rolled out a Legal Entity Template, to ask Registered Intermediaries to upload the KYCdata concerning to accounts of Legal Entities, which are opened after 1^st April, onto the Central KYC Registry.

However, it shall be noted that Foreign Portfolio Investors are not one of the eligible registered intermediaries for this SEBI Circular and are out of its ambit.

Also, Read: Revised Framework for Innovation Sandbox Prescribed by SEBI

Official SEBI Circular on Legal Entity Template