SEBI for strengthening Know Your Customer norms

Market regulator Securities and Exchange Board of India has proposed that brokers should limit trading exposure of their clients based on their financial position, a move intended to avoid any default from investors.

"The exposure or turnover limit given by the trading members should be commensurate with the financial details of the clients reported in the Know Your Customer (norms)," SEBI said in its draft proposals on improving sales practice by the members of the stock exchanges.

The exposure limit shall be in proportion to the financial details of the client, said the proposals on which SEBI has invited public comments by April 15.

The limits will have to be specified in KYC and will have to be strictly adhered to, SEBI said adding that if the details require modification, they should be appropriately altered.

Also, the regulator said only those who have a financial standing comparable to that of the client can act as introducers.

To ensure the identity of investor, documents like PAN card, income tax return and proof of residence have to be maintained along with the KYC norms.

These KYC norms were introduced under the Prevention of Money Laundering Act, 2002 as a part of the client identification process.

SEBI had prescribed certain requirements to know about clients. These included verification of identity and address, providing information of financial status, occupation and such other demographic information.