Stock exchanges have asked brokers to furnish Aadhaar details for all their existing clients before the end of this year. Brokers fear they won't be able to meet the deadline and have asked for more time 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 C J George, managing director, Geojit Financial Services.
“There are legacy clients. There are 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 said.
Stock exchanges, in a notice last week, had directed brokers to close the accounts of clients who fail to submit their Aadhaar details by December 31, 2017. Clients who have opened trading accounts after June 1, 2017, have been given six months’ time to submit details.
“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,” BSE said in a notice dated August 17.
“One way is to freeze the account which will make the investors unhappy. We are facing the difficult preposition of making the clients happy and at the same time ensuring compliance,” George said.
Small-sized brokers also fear an escalation in costs to meet the new directive.
“It entails additional costs on us. We have no choice but to comply, but it’s an irritant both for brokers and clients. There are already certain requisites for share trading pertaining to PAN numbers, KYC and so on. So when PAN has been mandatorily linked with Aadhaar why then link the same with demat (accounts)? It's nothing but duplication of work. Besides, it should have been done prospectively, not retrospectively,” said Alok Churiwala, managing director, Churiwala Securities.
Industry players say there are some clients who use multiple PAN cards for trading. Making Aadhaar compulsory will help weed out such investors and curb manipulation.
“By making Aadhaar mandatory, the verification of clients’ accounts would get easier. It will certainly curb manipulation in the stock market which has been increasing. However, this is just an extension to the current anti-money laundering law, which every new trading member/client has to comply with the PML (prevention of money laundering) rules effective June 1,” said Mehul Patel, member, BSE Brokers Forum.