Close on the heels of introducing daily concurrent audits and strengthening its internal audit norms, the National Securities Depositories (NSDL) has further tightened its know-your-clients (KYC) norms. It has introduced new penalties for errant depository participants registered with it.
A DP opening a demat account without conforming to NSDL rules or adequate proof of identity and/or proof of address and no adequate proof of address for change of address will be charged Rs 5,000. If such deviation is observed in two consecutive inspections, penalty would be doubled to Rs 10,000. If such deviation is observed for the third consecutive time, the matter would be referred to the disciplinary action committee.
For an account opened in an incorrect name for instance, accounts opened in the name of partnership firms/proprietary concerns/HUF the fine will be Rs 1,000 per deviation.
In a circular put up on its website, NSDL has listed a host of deviant procedures and assigned specific point weightage to each. The DPs are to be penalised according to the points they pile up through non-conformation.
As it had informed DPs about new audit systems, NSDL is keen on beefing up delivery instruction slips system. If the DP demonstrates no or inadequate control over issuance and/or acceptance of instruction slips, it is to be fined Rs 5,000 per instance.
Also, rules about client accounts debited without receiving proper authorisation have been changed. For up to five such deviations, the penalty is Rs 5,000 and thereafter Rs 1,000 for every deviation. If such deviation is observed in two consecutive inspections, the penalty would be Rs 10,000 and Rs 2,000 for every subsequent deviation. If the deviation is observed on three consecutive occasions, the matter would be referred to the disciplinary action committee. The penalty levied will be in addition to the restoration of securities in case a client disputes.
Franchisees carrying out functions that are in contravention to NSDL guidelines (such as in-person verification of clients at the time of opening of account, verification of delivery instruction slips, despatch of transaction statements) are to be referred to the disciplinary action committee.
In a move aimed at boosting investor confidence, change in a clients signature not done as per the prescribed procedure will attract a fine of Rs 5,000 per deviation. Additionally, account closure/freezing/ unfreezing not done as per NSDL norms would attract a penalty of Rs 500 per deviation. If the DP operates or uses NSDLs Speed-e facility contrary to NSDL procedure, it will have to pay Rs 500 per deviation.