Investors not updating their know-your-customer (KYC) form have been restricted from stock trading.
Earlier on March 9, Securities Board of Nepal (Sebon) had issued a circular to all stock brokerage firms, instructing them to update the KYC from of their clients and keep the identity record of their clients as per the new format by May 14.
The new KYC form prescribed by the Sebon is a more elaborated way of identifying a client. It includes more details of a client carrying out stock transaction. Among others, the new KYC form includes beneficiary owner identity number (BOID), bank account number, estimated annual income, finger print, profession and location map of the client.
“We had given brokerage firms ample time for KYC update. Any investor carrying out securities transaction must have their KYC updated by Monday for doing any trading,” Niraj Giri, the Sebon’s spokesperson, told Republica.
The move to get more and updated information of any client is part of the efforts to check the abuse of capital market for money laundering activities.
“Whatever problems that we have seen in recent years are linked with the KYC issue in one way or the other. The updated KYC form will help brokerage firms in identifying and understanding their clients, and their financial dealings,” he added.
Brokers say that investors will be able to buy or sell securities only after they update their KYC details in line with the new directive of the Sebon.
“Only the investors have filled up the new KYC form by Monday will be able to trade securities,” Priya Raj Regmi, president of Stock Brokers Association of Nepal (SBAN), said.
According to brokerage firms, the account of share clients will be like a dormant account of a bank account holder until their KYC form is updated. “It’s not that the account of the client will be shut down. It will remain dormant and should be updated according to the new KYC format before doing trading in the market,” a stock broker said. “It does not take much time to update the KYC form.”
Meanwhile, Sebon may extend the deadline for brokerage firms to comply with its new KYC rule. “We are getting reports about the KYC update from stock brokerage firms tomorrow. If huge number of investors is still to fill up KYC form, we might give them some more days,” a Sebon official said, requesting anonymity.
Amid restriction imposed by the Sebon for investors who have not updated their KYC details, the turnover in the stock market fell drastically on Tuesday.
The daily turnover at Nepal Stock Exchange (Nepse) slumped to Rs 149.24 million on Tuesday from the average daily turnover of Rs 558.62 million in the last month.
Observers attribute the fall in the daily turnover to the restriction on share trading for investors who are still to update their KYC form. “As many investors are yet to update their KYC, they could not carry out trading in the market. So, the KYC is the major reason behind the decline in the turnover,” said a broker.
The benchmark Nepse index also went down 4.32 points on Tuesday to close at 1,333.85 points.
Source: My Republica