Sebi extends timeline to submit public comments on proposal concerning account aggregator

AAs cannot see or store customer data since the data processed through them is encrypted, they merely transmit it from one financial institution to another based on a customer's direction and consent.

In its consultation paper, Sebi stated that there could be certain situations in the securities market when the "financial information" of a client could be sought using the AA framework. These include investment adviser and portfolio manager seeking information on financial assets or portfolio of the client via the AA framework in order to devise a financial plan for the client and verification of bank account wherever required when a client is on-boarded by an intermediary.

It was noted that though there are various safeguards in place and consistent communication advising caution, consumers sometimes adopt unsafe practices of sharing confidential information such as user IDs, passwords, OTPs, account numbers with third parties, and authorising third parties to operate their accounts.

"Such unsafe practices lead to frauds being perpetrated or funds and securities being misappropriated or financial products/services being mis-sold or customers being subjected to unsolicited cross-sell or upsell. It is in this context that comments are sought in improving the safeguards within the AA framework especially to curb misuse of the financial information in frauds, misappropriation, mis-selling or unsolicited cross-sell/upsell, etc.," it had stated.

The comment was sought on queries whether any type of intermediaries in the Indian securities market needs to be excluded from functioning as FIUs, the major potential use cases for the AA framework for Sebi-regulated entities and whether there are any additional categories of financial information that may be included under the ambit of the AA framework.