APMI – Ease of digital on-boarding for PMS

TABLE OF CONTENTS
1. BACKGROUND 6
2. PURPOSE 6
3. SCOPE 6
4. WHO CAN OPT FOR DIGITAL ONBOARDING 7
5. DIGITAL ONBOARDING PROCESS FLOW 7
6. CML GENERATION 10
7. RESPONSIBILITY 10

1. BACKGROUND
This document is prepared as required by the SEBI vide their circular No. SEBI/HO/IMS/IMDPoD/ OP/CIR/2024/35 dated May 02, 2024 regarding Portfolio Managers – Facilitating ease in digital on-boarding process for clients and enhancing transparency through disclosures to facilitate ease in digital on-boarding for clients of Portfolio Managers.

2. PURPOSE
The purpose of the document is to:
2.1 Streamline the Onboarding process: To have a smooth and efficient process reducing the time and effort required for account opening as compared to the physical paperwork.
2.2 Ensure Compliance with Regulatory Requirements: To adhere to all legal and regulatory standards, such as those set by SEBI (Securities and Exchange Board of India), ensuring that all necessary documentation and verification processes are correctly followed.
2.3 Enhance Client Experience and Satisfaction: To provide a seamless digital experience that meets modern client expectations, improving overall client satisfaction and retention.

3. SCOPE
Type of accounts that can be catered:
3.1 Individual (Single/Joint) : Individual can open single/joint account (maximum 2 joint holder). Individual can opt for maximum of three nominees.
Residential Status that can be catered:
3.2 Resident Indian (RI): Currently as per existing regulations digital onboarding is available for Resident Individual client singly and/or jointly with or without opting for nomination.
Digital onboarding should encompass:
• Online DEMAT account opening
• Online filling and signing of Risk Survey
• Online generation and signing of Client Agreement
• Online generation and signing of POA.
• Online generation and signing of MITC.
The idea of this Digital Onboarding SOP is that a client and/or his/her representative should be able to fill, generate and sign the above forms online in one go.

4. WHO CAN OPT FOR DIGITAL ONBOARDING
Taking into account various factors and variables, digital onboarding would be selectively applicable for the clients, who fulfil certain requirements.
The checklist of the pre-requisites which need to be performed before taking on any client for the Digital onboarding are as under:
• Client’s Aadhar and PAN should be linked.
• Client’s KRA status should be either validated or registered in their respective KRAs.
• Client should pass the AML (Anti Money Laundering) and SEBI restricted database and there shouldn’t be any match.
• Client should have the access to the phone number which is linked to his/her Aadhar to receive the OTP while e-signing with Aadhar.
The client or the Portfolio Manager (PM) should implement a verification mechanism to ensure compliance with the aforementioned points. If any of the above conditions are not satisfied, the client should not proceed with the Digital Journey. Instead, these clients should complete the demat account opening process using physical paperwork with wet signatures or go ahead with the KRA modification process and proceed further.

5. DIGITAL ONBOARDING PROCESS FLOW
Once the above requirements are fulfilled, the process for the Digital Onboarding is mentioned below.
5.1 Fetch the data from KRA by entering PAN of all the client(s) of the PMS. There are two types of details which gets auto populated:
5.1.1 Basic details: Name, DOB, Email, Phone number, Address, Gender, Marital status,
Occupation, PEP, Tax status, Residential Status, Fathers/Spouse’s name, Mother’s name, Nationality.
5.1.2 FATCA details: such as Place of birth, Country of birth, Tax residency, Gross annual income, or Net Worth.
5.1.3 If the client doesn’t change any of the above, the process hence forth is digital. If the client intends to change any of the above, the physical-digital process is not in the preview of this SOP document.
5.2 Include any details of restricted holdings provided by the client, if applicable.
5.3 Enter Bank account details: Clients must provide bank details where the account is in their name. For joint holding accounts, the bank details should be in the name of either account holder. Funds from unregistered bank accounts will not be accepted.
5.3.1 The bank account must be validated by performing a penny drop which validates the bank account by depositing a small amount of money into the account to check if the account is in the name of the client and is active.
5.3.1.1 No other proof to be asked from client if the penny drop is successful.
5.4 Enter Nominee details: It is recommended to add a nominee to the demat account in a PMS. If no nominee is designated, the “No Nomination” form must be e-signed by all holders. When designating a nominee, provide details as per the table below. Up to three nominees can be appointed. If a nominee is a minor, include guardian details, and account holders cannot act as guardians. Holders can decide the shareholding percentage for each nominee, ensuring the total adds up to 100%.Nominee Details: Nominees cannot be the applicant or joint applicant (nominees can be more than one, share details separately for all nominees), the portal must capture all the below details pertaining to the nominee.
• Name:
• DOB: (Proof to be attached, in case of a minor) • Relation with Applicant:
• Phone Number:
• Email:
• Address:
• ID Number (PAN/Passport/Aadhar):
• Share of each Nominee: (In case of more than one nominee)
If Nominee is a minor, please share same details for guardian: (cannot be the applicant or
joint applicant)
• Name:
• DOB:
• Relation with Nominee:
• Phone Number:
• Email:
• Address:
• ID Number (PAN/Passport/Aadhar):
5.5 Documents upload: There would be certain documents which would be required to be
uploaded. Proof of Identity (POI) and Proof of Address (POA) details must be relied upon
KRA details.
5.5.1 Photograph: Client’s photo must be uploaded which will be visible on the PMS and Demat application form.
5.5.2 Aadhar in cases where the KRA doesn’t have Aadhar as OVD.
5.6 In person verification: This will be a video IPV which will serve as liveliness check and details to be stored in Audit trail.
5.7 Generate the DEMAT account opening form with the above data and ask for client to e-sign now or e-sign post the PMS’s review.
5.8 Generate the POA, Agreement and Risk survey from the above details provided by the client and ask for client to e-sign now or e-sign post the PMS’s review.
5.9 For e-signing the POA, online integration with an e-stamp paper provider is required. Typically, the e-sign providers are also e-stamp paper providers.
5.10 If any of the documents uploaded (POA, POI, photo and AADHAR) are found to be incorrect or of poor quality, clients must be given an option to edit the same and re-submit.
5.11 If forms are to be reviewed by the PMS, post review the forms should be approved for E-sign as per IT Act by the client.
5.12 In case a PMS is using a third-party vendor whose e-stamp papers are not tech integrated for digital onboarding, the PMS can send the POA separately for e- sign. Such PMS’s may complete the tech integration with their e-stamp vendors to further easing the digital onboarding process.
5.13 The link shall be used to E-sign as per IT Act the PMS and Demat application form via Aadhar OTP.

The same link can also capture the Declaration stating, “I/We understand the fees/charge structure” this is typed using keyboard or written electronically using fingers/a stylus pen in case the client is on-boarded through digital mode by the first holder. Other holder/s should click on “Yes/No” to indicate that they have understood the fee structure. If the other holder(s) clicks “Yes”, then each of the holder should be given an option to e-sign the said text. If the other holder clicks “No”, then the digital onboarding process shall be halted until the Portfolio Manager explains the fee terms to the client. Post which the digital onboarding for that holder can be allowed to continue. But this time the holder should hand type (using a keyboard) “I/We now understand the fees/charge structure”. The fees illustrations and tables should be part of the agreement which is e-signed by the client.
 
5.14 An audit trail is supposed to be maintained which will authenticate the documents used for electronic signatures. The audit trail should have the below details.
• Date and time stamp of the e sign.
• IP address and Geo location of the e sign
• Details of client as well as Portfolio Manager
• Authentication type such as OTP
• Photograph of the client as captured while doing a liveliness check.

6. CML GENERATION
Once the forms are signed, the Demat account opening form should reach the Depository Participant (DP) with a copy to the client and the Portfolio Manager. The DP processes the form and creates a Demat account with either of the depositories (NSDL/CDSL).
There should be API’s available to upload the e signed data into the depository terminal from the DP side to generate the CML. This would further reduce the timeline and will enhance client experience.

7. RESPONSIBILITY
The Portfolio Manager holds the sole responsibility to maintain the records of the Demat account opening in the digital form and update the KRA details of the client on a periodic basis or whenever there is a change in the client’s profile.

Also, the end client should receive the e-signed form along with audit trail.