Description

BSE mandates that clients with KYC 'On Hold' status uploaded between December 1-31, 2025 will be blocked from trading and unable to square off positions effective January 24, 2026 until KRA validation is completed.

Summary

BSE has issued guidelines pursuant to amendments in SEBI KYC Registration Agency (KRA) Regulations, 2011. Effective January 24, 2026, clients whose KYC applications uploaded to KRA between December 1-31, 2025 remain in ‘On Hold’ status (non-validated) will be prohibited from trading on the exchange and will be unable to square off their existing open positions. Trading members must ensure compliance with KRA validation requirements. The exchange will flag non-compliant PANs as ‘Not Permitted to Trade’ based on KRA-provided data, with T+1 restoration upon compliance.

Key Points

  • Clients with KYC ‘On Hold’ status (both AADHAAR and Non-AADHAAR based OVD) uploaded to KRA from December 1, 2025 to December 31, 2025 will face trading restrictions
  • Trading restrictions and position square-off prohibition effective from January 24, 2026
  • Open positions of non-compliant clients will naturally expire on contract expiry dates
  • KRA shares demise data daily; trading members must block debit transactions, suspend trading accounts, and inactivate/close UCC across all exchanges for deceased investors
  • Non-compliant client list available at: \EQ\Transaction\January-2026\12-01-2026\Non_Validated_Clients_by_KRAs_Clgno_xxxx.TXT
  • PANs that become KRA compliant will be permitted to trade on T+1 basis after compliance confirmation

Regulatory Changes

This circular builds upon:

  • SEBI Circular No. SEBI/HO/MIRSD/FATF/P/CIR/2023/0144 dated August 11, 2023
  • Previous BSE circular notice no. 20251210-27 dated December 10, 2025 on “Simplification of KYC process and rationalisation of Risk Management Framework at KRAs”
  • SEBI Circular SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163 dated October 3, 2023 regarding centralized mechanism for reporting investor demise through KRAs

The amendment reinforces stricter enforcement of KYC validation requirements and establishes a defined timeline for restricting non-compliant accounts.

Compliance Requirements

For Trading Members:

  • Monitor and identify clients with KYC ‘On Hold’ status from the specified period (December 1-31, 2025)
  • Review non-compliant client list provided by BSE at designated file path
  • Ensure clients complete KRA validation requirements before January 24, 2026 deadline
  • Block debit transactions in accounts of deceased investors as per daily KRA demise data
  • Suspend all transactions in trading accounts and inactivate/close UCC across all stock exchanges for deceased investors
  • Track T+1 reactivation for clients who achieve KRA compliance

For Clients:

  • Complete KYC validation with KRA if application is in ‘On Hold’ status
  • Ensure all required documentation and verification is submitted to remove ‘On Hold’ status
  • Comply with both AADHAAR and Non-AADHAAR based OVD requirements as applicable

Important Dates

  • December 1-31, 2025: KYC application upload period to KRA (affected cohort)
  • January 12, 2026: Circular issue date
  • January 24, 2026: Trading restrictions and position square-off prohibition effective date for non-compliant clients
  • T+1 basis: Trading restoration timeline after achieving KRA compliance (T = day KRA confirms compliance to exchange)

Impact Assessment

Operational Impact:

  • Trading members must implement systems to identify and restrict non-compliant clients from the specified upload period
  • Additional compliance monitoring and client communication required
  • Administrative burden to track daily KRA updates for compliance status changes

Market Impact:

  • Clients with pending KYC validation face complete trading prohibition
  • Non-compliant clients cannot manage risk by squaring off positions, forcing natural contract expiry
  • Potential liquidity impact if significant number of clients affected

Client Impact:

  • High severity for affected clients who cannot trade or close existing positions
  • Financial risk exposure for clients holding open positions until contract expiry
  • Urgent action required for clients in ‘On Hold’ status to avoid restrictions

Risk Management:

  • Enhanced risk for clients unable to exit positions during market volatility
  • Trading members must proactively communicate with affected clients to ensure timely compliance
  • Centralized demise reporting mechanism reduces fraud risk and ensures timely account blocking

Contact Information:

  • Phone: 022-2272 8435/5785
  • Email: ucc@bseindia.com
  • Officials: Keyur Punatar (Deputy Vice President, Investigation), Poonam Pisat (Assistant Vice President, Investigation)

Impact Justification

High severity and impact due to immediate trading restrictions affecting all non-validated clients from a specific period, with inability to square off open positions, potentially causing significant operational and financial impact for both trading members and clients.