Master Circular for Depositories
Summary
This section of the SEBI Master Circular outlines the requirements for opening Beneficial Owner accounts, specifically focusing on Proof of Identity and Address. It establishes PAN as the sole identification number for securities market transactions effective July 2007. Depository Participants are mandated to collect, verify, and maintain records of these identity and address documents. This section mandates Due Diligence for third-party addresses and outlines exemptions from mandatory PAN requirements for specific entities like governments and Sikkim residents. It details the verification obligations for Depository Participants regarding institutional clients and mismatched names. Additionally, it prohibits various account-related fees including opening, custody, closure, and transfer charges while regulating upfront maintenance fee refunds. Section 1.3.6 mandates Depository Participants to submit annual tariff structures for dissemination by depositories on their websites. Section 1.4 requires clearing members to transfer funds and securities to client accounts within one working day, imposing penalties for delays. Sections 1.5 through 1.7 detail grievance redressal mechanisms, e
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With effect from July 02, 2007, PAN is the sole identification number for all transactions in the securities market, irrespective of the amount of transaction. A copy of the PAN card with photograph may be accepted as Proof of Identity.
Intermediaries shall: I. Put necessary systems in place so that the databases of the clients and their transactions are linked to the PAN details of the client. II. Build necessary infrastructure to enable accessibility and query based on PAN thereby enabling retrieval of all the details of the clients. III. Collect copies of PAN cards issued to the existing as well as new clients by the Income Tax Department and maintain the same in their record after verifying with the original. IV. Cross-check the aforesaid details collected from their clients with the details on the website of the Income Tax Department.
For individuals falling under the category exempted from the mandatory requirement of PAN, a copy of any one of the following may be accepted as Proof of Identity: Passport; Voter ID Card; Driving license; PAN card with photograph; Identity card/document with applicant’s Photo issued by specified authorities including Government, Banks, Professional Bodies, etc.
A copy of any one of the following documents may be accepted as proof of address: Ration Card; Passport; Voter ID Card; Driving license; Bank Passbook; Verified copies of Electricity bills (not more than 2 months old), Residence Telephone bills (not more than 2 months old) and Lease and License agreement / Agreement for sale; Self-declaration by High Court and Supreme Court judges; Identity card/document with address issued by specified authorities.
DP shall ensure that all documents pertaining to proof of identity and proof of address are collected from all the account holders. Submission of the aforesaid documents is the minimum requirement for opening a BO Account. DPs must verify the copy of the aforementioned documents with the original before accepting the same as valid.
SEBI has no objection to a BO authorizing the capture of an address of a third party as a correspondence address, provided that the Depository Participant (DP) ensures that all prescribed ‘Know Your Client’ norms are fulfilled for the third party also. The DP shall obtain proof of identity and proof of address for the third party. The DP shall also ensure that customer due diligence norms as specified in Rule 9 of Prevention of Money Laundering Rules, 2005 are complied with in respect of the third party. The depository participant should further ensure that the statement of transactions and holding are sent to the BO’s permanent address at least once in a year. However, the above provision shall not apply in case of PMS (Portfolio Management Services) clients.
The demat accounts for which PAN details have not been verified are “suspended for debit” until the same is verified with the Depository Participant (DP). With effect from August 16, 2010 such PAN non- compliant demat accounts were also "suspended for credit" other than the credits arising out of automatic corporate actions. It was clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions would not be allowed into such accounts.
PAN card may not be insisted upon in case of transactions undertaken on behalf of Central Government and/or State Government and where transactions are conducted by officials appointed by Courts e.g. Official liquidator, Court receiver etc. However DPs, before implementing the above exemption, shall verify the veracity of the claim of the organizations by collecting sufficient documentary evidence in support of their claim for such an exemption.
Investors residing in the state of Sikkim are exempted from the mandatory requirement of furnishing PAN card details for their demat accounts. DPs shall verify the veracity of the claim of the investors that they are residents of Sikkim, by collecting sufficient documentary evidence in support of their address.
UN entities/ multilateral agencies exempt from paying taxes/filing tax returns in India are also exempt from the mandatory requirement of submitting their PAN card details, subject to the DPs collecting documentary evidence in support of such claims.
Custodians shall verify the PAN card details of institutional clients with the original PAN card and provide duly certified copies of such verified PAN details to the brokers. This requirement is applicable in respect of institutional clients, namely, FIIs, MFs, VCFs, FVCIs, Scheduled Commercial Banks, Multilateral and Bilateral Development Financial Institutions, State Industrial Development Corporations, Insurance Companies registered with IRDA and Public Financial Institution as defined under section 4A of the Companies Act, 1956.
The BO account shall be in the name of natural persons, PAN card details of the respective HUF, AoP, Partnership Firm, Unregistered Trust, etc shall be obtained. The PAN number of Registered Trust, Corporate Bodies and minors shall be obtained when accounts are opened in their respective names.
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Source: SecMarx — Master Circular for Depositories. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.