SEBI Issues Framework for Orderly Exit of KYC Registration Agencies

New Delhi, Sep 2025 : The Securities and Exchange Board of India (SEBI) has introduced a comprehensive framework to streamline the surrender process of Know Your Client Registration Agencies (KRAs), ensuring investor interests remain protected during both voluntary and involuntary exits.

The framework is designed to enable an orderly winding down of KRAs, whether due to business decisions, financial distress, or regulatory action. As per SEBI’s circular, KRAs giving up their registration must transfer all KYC records — including modifications and audit trails — to another SEBI-registered KRA. This ensures investors do not have to undergo KYC afresh. Interoperability and portability of records must also be maintained.

Each KRA is required to adopt a board-approved Standard Operating Procedure (SOP) to manage the winding-down process. The SOP must cover record transfer, settlement of obligations, and data protection. Additionally, an oversight committee should be set up to monitor compliance.

SEBI has laid down strict timelines: regulators must be informed within seven days of board approval; stakeholders must be notified within 14 days; data migration and system deactivation must be completed in 60 days; and final audits and closure procedures should follow within 75 days. A compliance report confirming completion must be submitted to SEBI within 90 days.

To further safeguard investors, KRAs are required to provide investor support desks for 12 months after SEBI’s approval of surrender. In voluntary exits, public notices are mandatory. In cases of involuntary exits, SEBI may appoint a temporary administrator or designate an acquirer KRA to ensure market stability.

The regulator also emphasized that KRAs must remain compliant with SEBI regulations, the Prevention of Money Laundering framework, and other applicable laws until the surrender process is fully completed.