SEBI Guidelines on Participation of Depositories and AMCs as FIPs in Account Aggregator framework

 

SEBI Guidelines on Participation of Depositories and AMCs as FIPs in Account Aggregator framework

 

SEBI vide SEBI/HO/MRD/DCAP/P/CIR/2022/110 August 19, 2022 addressed to Depositories and Asset Management Companies, released Guidelines on Participation of Depositories and AMCs Asset Management Companies Financial Information Providers in Account Aggregator framework

 

 

Depositories and AMCs are only FIPs and not FIUs

Under the AA framework,

FIPs - Financial Information Providers (FIPs) are institutions that function as stewards of user data. These are the banks, mutual funds, pension funds, etc. that represent the ‘source’ of personal or business data which FIUs can access via requests through an Account Aggregator.

FIUs - “Financial Information User’. An FIU consumes the data from an FIP to provide various services to the end consumer. For e.g. a lending Bank wants access to the borrower’s data to determine if a borrower qualifies for a loan. The lending Bank is the FIU. Banks play a dual role – both as an FIP and an FIU. Ex – Lending firms, personal finance, wealth management companies

 

Depositories and AMCs cannot be FIUs as they have no need of financial information of their account holders.

 

The highlights are as under: -

·       Asset Management Companies (AMCs) will operate through their Registrar and Transfer Agents (RTAs)

·       FIPs in securities market shall enter into a contractual framework with the AAs, and the same shall distinctly specify the following:

·       Rights and obligations of each party

·       Modalities of Dispute Resolution mechanism

 

·       The FIPs in the securities markets shall share the “Financial Information” pertaining to securities markets, through the AA only on receipt of a valid consent artefact from the customer through the Account Aggregator.

 

·       All responses of the FIPs in the securities markets shall be in real time.

 

·       To enable these data flows, the FIPs in the securities markets shall:

·       implement interfaces that will allow an Account Aggregator to submit consent artefacts, and authenticate each other, and would enable secure flow of financial information to the AA;

·       adopt means to verify the consent including digital signatures, if any, contained in the consent artefact;

·       implement means to digitally sign the financial information that is shared by them about the customers;

·       maintain a log of all information sharing requests and the actions performed by them pursuant to such requests.

 

·       The participation of depositories as FIPs in the AA ecosystem shall not impact the existing mechanism as per circular CIR/MRD/DP31/2014 dated November 12, 2014 of issuances of Consolidated Account Statement to the investors by depositories or AMCs/MF-RTAs providing consolidated information of the mutual fund investments and holdings of investors in demat accounts.

·       The Financial Information Providers (FIPs) in securities market must disclose prominently on their websites the names of the Account Aggregators through which the FIP shares the information about assets held with respect to securities markets with the customers and Financial Information Users (FIUs).

·       This means all the AA authorised by Reserve Bank of India will not be able to shares the customers data, as each AA has to individually sign up with the respective Depo and AMCs. Not sure how customer friendly this is

 

 

A depository can be an organization, bank, or institution that holds securities and assists in the trading of securities.

In India, there are two depositories: National Securities Depositories Ltd (NSDL) and Central Securities Depositories Ltd (CDSL) opertaing in the Securities Market.

 

In India, a Depository Participant (DP) is described as an Agent of the depository. They are the intermediaries between the depository and the investors.

 

Depository Participant (DP) are directly not part of the Account Aggregator framework.

Registrar and Transfer Agents  are the trusts or institutions that register and maintain detailed records of the transactions of investors for the convenience of mutual fund houses.

Read the full SEBI circular @ https://www.sebi.gov.in/legal/circulars/aug-2022/participation-as-financial-information-providers-in-account-aggregator-framework_62157.html

Trust by the end of the calendar year, both the Depo and majority of the AMCs will be live in the AA platform.

Disclaimer:  These are my personal views only. The bottom line is Safe ePayments. Nothing More – Nothing Less.