Sebi vets UID use for stock market deals

Ashish Rukhaiyar
Mumbai, December 10, 2010

The Securities and Exchange Board of India (Sebi) has taken the first step towards evaluating the feasibility of using the unique identification (UID) number for all securities market transactions.

Nandan Nilekani, who is heading the UID project, met Sebi brass yesterday and explained how the number could be relevant in capital market transactions. The meeting was attended by stock exchange officials, investment bankers, brokers, fund managers, registrars and depository participants.

According to a person privy to the development, the importance of the meeting can be gauged from the fact that top Sebi officials, including Chairman C B Bhave, besides whole-time members and executive directors, were present. Recent reports suggest that the Ministry of Finance has asked Sebi to see if UID can be made mandatory for all securities market transactions.

“The session aimed at creating awareness about UID among various market participants,” said a person who attended the meeting, adding, “It is too early to comment on the implementation, as the process of issuing UIDs has only begun.”

UID was launched on September 29, when 10 residents of Tembhali village in Nandurbar, Maharashtra, were issued their numbers. According to the website of the Unique Identification Authority of India, over 600 million UIDs will be issued over five years.

“The meeting was a starting point for evaluating UID from the capital market perspective,” said another person who attended the proceedings. “We discussed how it could be applied (in stock market transactions). For instance, regulators wanted to know how it could capture change in the address of the investor, as a lot of corporate actions (dividends, AGM reports) require addresses of shareholders,” he said.

Others who attended the meeting included Sanjay Sharma of Deutsche Bank (also the vice-chairman of the Association of Merchant Bankers of India), Milind Barve of HDFC Mutual Fund and S Subramaniam of Enam. Top officials of the Bombay Stock Exchange, the National Stock Exchange and representatives of depositories and registrars were also present.

According to industry players, a move towards UID will mean a paradigm shift from the current use of the permanent account number (PAN) for all stock market transactions. “Multiple PANs in the name of a single person is a systemic risk, which will be eliminated by migrating to UID. One cannot have multiple UIDs, as the system will also capture fingerprints and iris details,” said the head of a domestic retail brokerage.