SEBI issues new rules for surrendering KRA licences to safeguard interests of investors

New Delhi: The Securities and Exchange Board of India (Sebi) on Friday issued a circular introducing a structured framework for surrendering KYC Registration Agency (KRA) licences, aimed at ensuring orderly winding down of such entities while protecting investors’ interests.

The regulator said the new framework is designed to handle both voluntary exits by KRAs due to business decisions and involuntary exits triggered by financial distress or regulatory action. “It is decided that the process for surrender of KRA registration should be streamlined for voluntary/involuntary scenarios so that critical operations and services of KRA are wound down in an orderly manner,” Sebi stated.

As per the framework, KRAs must maintain interoperability and portability of investor KYC records. If a KRA surrenders its registration, all records, including modifications and audit trails, must be transferred to another Sebi-registered KRA to ensure investors are not required to undergo fresh KYC.

Each KRA must also adopt a board-approved SOP detailing modalities for record transfer, settlement of contractual obligations, and safeguarding investor data. In addition, KRAs exiting the system must constitute an oversight committee to supervise the winding-down pro-cess, including data migration and service continuity.

The framework prescribes strict timelines. After board approval, KRAs must inform Sebi within seven days and notify stakeholders within 14 days. Data transfer and system deactivation must be completed within 60 days, followed by audits within 75 days. A compliance report confirming completion must be submitted to Sebi within 90 days. Investor support desks must remain functional for 12 months after Sebi approves the surrender.

For voluntary exits, KRAs must issue public notices and provide intermediaries adequate time to transi-tion. In cases of involuntary exits, Sebi may appoint a temporary administrator, nominate an acquiring KRA, or relax timelines to safeguard investors and market stability. Sebi reiterated that KRAs must remain compliant with all regulatory obligations, including rules under the PMLA, until the winding-down process is fully completed.