Sebi puts KYC onus on market players

Capital markets regulator Sebi on Wednesday said market intermediaries, including mutual fund houses and registrar and transfer agents (R&TAs), cannot escape the blame for wrong or improper Know Your Clients (KYC) compliance and put the blame on third-party companies (outsourcing agents) for wrong or improper data on clients.

Putting the onus solely on market intermediaries, in a letter to Chennai-based CAMS, a registrar and transfer agent, Sebi said: "Where lack of diligence and care in the maintenance of records is proved, the AMC (asset management company) and the intermediary may be held liable for violation of the Prevention of Money Laundering Act Rules, Sebi guidelines on Anti-Money Laundering and the code of conduct under the regulations concerned."

CAMS had earlier written to Sebi whether the R&TA will be considered to have conformed to guidelines by accepting instructions from AMC to overwrite demographic details of investors with data provided by a third party.

Responding to this letter, Sebi had said that the entity to whom the responsibility had been outsourced would act only as an agent.

"The ultimate responsibility as regards the veracity and adequacy of KYC norms would still rest with the intermediary," the Sebi letter said.