Description

BSE circular regarding KYC validation requirements and trading restrictions for non-compliant clients effective December 20, 2025.

Summary

BSE has issued guidelines pursuant to amendments in SEBI KYC (Know Your Client) Registration Agency (KRA) Regulations, 2011. Trading members must ensure clients have validated KYC through KRAs. Clients with KYC “On Hold” status (uploaded between November 1-30, 2025) will be prohibited from trading and squaring up positions effective December 20, 2025 until compliance is achieved. The Exchange will flag non-compliant PANs as “Not Permitted to Trade” based on KRA data. Members must also block debit transactions and suspend trading accounts for deceased investors as per centralized demise reporting mechanism.

Key Points

  • Clients with non-validated KYC (“On Hold” status) uploaded to KRA between November 1-30, 2025 will be restricted from trading effective December 20, 2025
  • Restricted clients cannot trade or square up open positions; positions will naturally expire on contract expiry date
  • Exchange will flag non-compliant PANs as “Not Permitted to Trade” from December 20, 2025
  • Clients who subsequently become KRA compliant will be permitted to trade on T+1 basis
  • Trading members must block debit transactions and suspend trading accounts for deceased investors based on daily demise data shared by KRA
  • Non-compliant client list available at path: \EQ\Transaction\December-2025\10-12-2025 Non_Validated_Clients_by_KRAs_Clgno_xxxx.TXT

Regulatory Changes

This circular references SEBI Circular No. SEBI/HO/MIRSD/FATF/P/CIR/2023/0144 dated August 11, 2023 regarding simplification of KYC process and rationalization of Risk Management Framework at KRAs. It also references SEBI Circular SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163 dated October 3, 2023 establishing centralized mechanism for reporting investor demise through KRAs. The amendments to SEBI KYC Registration Agency (KRA) Regulations, 2011 require stricter validation of both Aadhaar and Non-Aadhaar based OVD (Officially Valid Documents).

Compliance Requirements

  1. Trading Members must:

    • Monitor daily demise data shared by KRA and block debit transactions in deceased investor accounts
    • Suspend all transactions in trading accounts and inactivate/close UCC in all stock exchanges for deceased investors
    • Access non-compliant client list from specified path and take necessary action
    • Ensure clients complete KYC validation requirements before December 20, 2025
    • Contact BSE at ucc@bseindia.com or 022-2272 8435/5785 for clarifications

  2. Clients must:

    • Complete KYC validation through KRAs if their KYC is “On Hold” status
    • Ensure both Aadhaar and Non-Aadhaar based OVD validation is completed
    • Comply with validation requirements to regain trading access on T+1 basis

Important Dates

  • November 1-30, 2025: Period during which KYC uploaded to KRA and found “On Hold” will be subject to trading restrictions
  • December 10, 2025: Circular issuance date
  • December 20, 2025: Effective date for trading restrictions on non-compliant clients; clients will not be permitted to trade or square up positions from this date
  • T+1 basis: Timeline for reinstating trading access after achieving KRA compliance (T = day Exchange receives compliance information from KRA)

Impact Assessment

Operational Impact:

  • Trading members must implement systems to identify and restrict non-compliant clients from December 20, 2025
  • Members need to monitor daily KRA updates for both non-compliant clients and deceased investors
  • Administrative burden on members to communicate with affected clients and facilitate KYC compliance

Client Impact:

  • Clients with “On Hold” KYC status face complete trading prohibition including inability to square up existing positions
  • Open positions of non-compliant clients will expire naturally on contract expiry dates, potentially causing financial losses
  • High urgency for affected clients to complete validation before December 20, 2025 deadline

Market Impact:

  • Enhanced investor protection through stricter KYC validation
  • Potential reduction in trading volumes from restricted clients until compliance is achieved
  • Improved data integrity and regulatory compliance across market ecosystem
  • Strengthened framework for handling deceased investor accounts preventing unauthorized transactions

Impact Justification

Mandatory compliance requirement affecting all trading members and clients with non-validated KYC; trading restrictions effective December 20, 2025 for non-compliant clients.