Framework for automated deactivation of trading and demat accounts in cases of inadequate KYCs
Summary
SEBI mandates a framework for the automated deactivation of trading and demat accounts when clients fail to maintain accurate KYC addresses. The process requires Market Intermediaries (MIIs) to physically serve Show Cause Notices and deactivate accounts if delivery fails across all linked entities. Reactivation is permitted upon submission of correct address proof and signed acknowledgment, subject to specific timelines.
Text
MIIs shall arrange to physically deliver SCN or orders issued by SEBI and forward signed acknowledgement within 30 working days; failure to do so triggers deactivation.
If none of the MIIs are able to deliver the SCN or obtain signed acknowledgement, all MIIs shall deactivate all trading and demat accounts based on PAN within 5 working days from the last unsuccessful delivery report.
MIIs shall send an email/SMS to the entity before deactivation.
If one MII delivers SCN and obtains signed acknowledgement, no accounts shall be deactivated, but MIIs must ensure KYC records are updated and confirmed to the KRA.
Pending pay-in and pay-out obligations and open positions may be permitted to be settled, squared off or closed out while enforcing deactivation.
MIIs shall communicate deactivation details and reasons to registered intermediaries and display reasons clearly when the entity attempts to transact.
MIIs shall ensure that deactivated accounts are not used for dealing in securities market in any manner whatsoever.
Entity may request re-activation by providing correct proof of address and signed acknowledgement of receipt of SCN/order.
Registered intermediary shall update KYC records and forward copy of signed acknowledgement to concerned MII for re-activation.
MII shall re-activate accounts after ensuring entity provided signed acknowledgement and confirmation of compliant KYC records from intermediary.
Signed acknowledgement shall be forwarded by intermediary to MII within 2 working days, and by MII to SEBI within 2 working days of receipt.
Process of reactivating accounts by MIIs shall not exceed more than 5 working days after receipt of request along with documents.
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Source: SecMarx — Framework for automated deactivation of trading and demat accounts in cases of inadequate KYCs. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.