Context:
The Securities and Exchange Board of India (SEBI) has proposed a new framework to ensure the orderly winding down of critical services by KYC Registration Agencies (KRAs) in scenarios such as:
- Insolvency
- Business cessation
- Regulatory action
Key Goal:
- To protect investor interests and ensure uninterrupted KYC services even during transitions.
Core Principles of the Proposal
SEBI’s consultation paper highlights the need to:
- Guarantee continuous KYC-related services for market participants
- Protect sensitive investor KYC data
- Ensure compliance with statutory and contractual obligations
- Enable a smooth transfer of operations to a designated successor KRA
Key Features of the Proposed Framework
- Standard Operating Procedures (SOPs): KRAs will be required to establish comprehensive SOPs for potential wind-down scenarios.
- Scenario Mapping: Agencies must identify and plan for various contingencies such as legal suspension, loss of license, or operational failure.
- Successor Transition: SEBI mandates that the framework include provisions for seamless transfer of infrastructure, data, and operations to a successor KRA with minimal disruption.
KRA Responsibilities
KRAs will be responsible for:
- Finalizing the detailed operational and technical protocols
- Coordinating with SEBI and market infrastructure institutions
- Implementing preventive and recovery measures to manage service continuity
