CIRCULAR,
CIR/MIRSD/2/2013, dated January 24, 2013
SEBI Registered
Intermediaries:
1. Stock Brokers
through Recognized Stock Exchanges
2. Depository
Participants (DPs) through Depositories
3. Mutual Funds
(MFs)
4. Association
of Mutual Funds in India (AMFI)
5. Portfolio
Managers (PMs)
6. KYC
Registration Agencies (KRAs)
7. Alternate
Investment Funds (AIFs)
8. Collective
Investment Schemes (CIS)
9. Investment
Advisers (IAs)
1. SEBI Master
Circular No. CIR/ISD/AML/3/2010 dated December 31, 2010 has mandated all
registered intermediaries to obtain, as part of their Client Due Diligence
policy, sufficient information from their clients in order to identify and
verify the identity of persons who beneficially own or control the securities
account. The beneficial owner has been defined in the circular as the natural
person or persons who ultimately own, control or influence a client and/or
persons on whose behalf a transaction is being conducted, and includes a person
who exercises ultimate effective control over a legal person or arrangement.
2. SEBI has also
prescribed uniform Know Your Client (KYC) requirements for the securities
markets vide circular nos. CIR/MIRSD/16/2011 dated August 22, 2011 and MIRSD/SE/Cir-21/2011
dated October 5, 2011. The SEBI KYC Registration Agency (KRA) Regulations, 2011
have been notified and guidelines have been issued under these regulations from
time to time.
3. Further, the
Prevention of Money Laundering Rules, 2005 also require that every banking
company, financial institution and intermediary, as the case may be, shall
identify the beneficial owner and take all reasonable steps to verify his
identity. The Government of India in consultation with the regulators has now
specified a uniform approach to be followed towards determination of beneficial
ownership. Accordingly, the intermediaries shall comply with the following
guidelines.
A. For clients
other than individuals or trusts:
4. Where the
client is a person other than an individual or trust, viz., company, partnership
or unincorporated association/body of individuals, the intermediary shall
identify the beneficial owners of the client and take reasonable measures to
verify the identity of such persons, through the following information:
a. The identity of the natural person,
who, whether acting alone or together, or through one or more juridical person,
exercises control through ownership or who ultimately has a controlling
ownership interest.
Explanation: Controlling ownership
interest means ownership of/entitlement to:
i. more than 25% of shares or capital or
profits of the juridical person, where the juridical person is a company;
ii. more than 15% of the capital or
profits of the juridical person, where the juridical person is a partnership;
or
iii. more than 15% of the property or
capital or profits of the juridical person, where the juridical person is an
unincorporated association or body of individuals.
b. In cases where there exists doubt
under clause 4 (a) above as to whether the person with the controlling
ownership interest is the beneficial owner or where no natural person exerts
control through ownership interests, the identity of the natural person
exercising control over the juridical person through other means.
Explanation: Control through other means
can be exercised through voting rights, agreement, arrangements or in any other
manner.
c. Where no natural person is identified
under clauses 4 (a) or 4 (b) above, the identity of the relevant natural person
who holds the position of senior managing official.
B. For client
which is a trust:
5. Where the
client is a trust, the intermediary shall identify the beneficial owners
of the client and take reasonable measures to verify the identity of such persons,
through the identity of the settler of the trust, the trustee, the protector,
the beneficiaries with 15% or more interest in the trust and any other natural
person exercising ultimate effective control over the trust through a chain of
control or ownership.
C. Exemption in
case of listed companies:
6. Where the
client or the owner of the controlling interest is a company listed on a stock
exchange, or is a majority-owned subsidiary of such a company, it is not
necessary to identify and verify the identity of any shareholder or beneficial
owner of such companies.
D. Applicability
for foreign investors:
7.
Intermediaries dealing with foreign investors’ viz., Foreign Institutional Investors,
Sub Accounts and Qualified Foreign Investors, may be guided by the
clarifications issued vide SEBI circular CIR/MIRSD/11/2012 dated September 5,
2012, for the purpose of identification of beneficial ownership of the client.
E.
Implementation:
8. The
provisions of this circular shall come into force with immediate effect. Intermediaries
are directed to review their Know Your Client (KYC) and Anti-Money Laundering
(AML) policies accordingly.
9. The Stock
Exchanges and Depositories are directed to:
a. bring the provisions of this circular
to the notice of the Stock Brokers and Depository Participants, as the case may
be, and also disseminate the same on their websites;
b. make amendments to the relevant
bye-laws, rules and regulations for the implementation of the above decision in
co-ordination with one another, as considered necessary;
c. monitor the compliance of this
circular through half-yearly internal audits and inspections; and
d. communicate to SEBI, the status of
the implementation of the provisions of this circular.
10. In case of
mutual funds, compliance of this circular shall be monitored by the Boards of
the Asset Management Companies and the Trustees and in case of other
intermediaries, by their Board of Directors.
11. This
circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities markets.
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