Sebi ask SEs to be Aadhaar-compliant by 31 December; brokers seek more time

Brokers used only to PAN have sought more time to shift to Aadhaar even as stock exchanges have asked them to furnish Aadhaar details for all their existing clients before the end of this year.

Brokers, who fear an escalation in costs under Aadhaar compliance, say they won't be able to meet the deadline and have asked for more time beyond the prescribed 31 December deadline for compliance.

Market regulator Securities and Exchange Board of India (Sebi) has asked exchanges for their feedback on brokers' preparedness to get their clients to submit Aadhar card details before 31 December, setting the ball rolling for making Aadhaar compulsory for stock trading.

In a notice last week, stock exchanges directed brokers to close the accounts of clients who fail to submit Aadhaar details by 31 December 2017. The exchanges want brokers' clients who have opened trading accounts after 1 June 2017, to submit Aadhaar details within six months.

BSE has issued a circular asking brokers for their comments on the matter by 23 August. The exchange wants existing clients to submit Aadhaar numbers to their brokers by 31 December while new clients should submit details within six months of starting the demat account.

"In case of failure to submit the documents within the aforesaid time limit, the account shall cease to be operational till the time Aadhaar number is submitted by the client," BSE said in a notice dated 17 August.

Brokers, however, say 100 per cent compliance by the 31 December deadline will be difficult without losing business as small clients will find it troublesome.

Brokers blame legacy issues as a lot of investors are not active now but were active in the past. These cannot be settled anytime soon as tracking the clients itself would take much time.

The exercise is both timeconsuming and costlier, and would be a burden on small brokers.

Also, there are other issues like multiple PAN numbers to be addressed as stock markets have been one main conduit for money laundering.

While making Aadhaar mandatory would make verification of clients' accounts easier, it will hurt stock market manipulators who use multiple PAN numbers to launder money.