The issue of multiple PANs and fake demat accounts have forced SEBI to make Aadhar card mandatory for stock markets.
With the intention to stall money laundering and tax evasion, Securities and Exchange Board of India (SEBI), the market regulator has asked the exchanges for their feedback on brokers’ preparedness to get their clients to furnish Aadhaar card details before the end of the year. BSE asked brokers for their comments on the matter by August 23 in a recent circular.
The exchange said that existing clients will have to submit the Aadhar card numbers to their brokers by December 31. New clients must furnish the 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,” the circular said.
The issue of multiple PANs and fake demat accounts have forced SEBI to take this decision. SEBI has cracked down heavily on entities who have misused the stock exchange platform to convert their black money into white. The government too believes that although PAN is a unique identification proof for every individual, it may not be enough to curb money laundering. A mandatory Aadhaar will make it difficult to launder money via exchanges. However, brokers have asked for more time to shift to Aadhaar and said they won’t be able to meet the deadline for compliance.
“The December deadline will be slightly cumbersome in terms of achieving 100 per cent compliance. We have told stock exchanges to give us a year to complete the full database,” said CJ George, MD, Geojit Financial Services. “There are legacy clients. There are a lot of investors who are not active now but were active in the past. We have asked for time for such accounts. Even if we give notice, they won’t respond,” he added.
Vinay Agrawal from Angel Broking said, “Customers have already linked Aadhaar with PAN and bank account but due to privacy or confidentiality issues these agencies don’t share the details and we have to approach the customers. As brokers, we don’t have a choice but the regulator has given us enough time.”