SEBI Proposes Framework To Link Trading Account With Mobile Number, Device

In a bid to create a safe and secure trading environment for investors, markets regulator Securities Exchange Board of India (SEBI) has released a consultation paper on implementing new technological measures to prevent unauthorised transactions in investors’ demat account. 

In its proposed framework, SEBI has suggested an authentication mechanism that requires the stock broking or trading applications to recognise a user’s unique client code (UCC), along with SIM and mobile devices. 

The suggested method to access trading accounts is similar to UPI payment applications where the UPI application recognises SIM along with mobile device and bank account details to carry out transactions. 

Under the proposed framework, a mobile device with the registered mobile number and device IMEI (international mobile equipment identity) number will be linked to the UCC of the app user.

The UCC is a unique client code or an identification number assigned to clients by a stockbroker. 

Further, a bio-metric authentication would be required on the primary mobile device for authorising the log-in into the trading application provided by stock brokers. 

To log-in into other devices such as desktop, QR code based and proximity sensitive and time sensitive authentication would be used in the trading application for authorisation.

The hard bind device or the SIM-mobile-UCC enabled device would become the primary device. 

Besides, users will have an option to register one more SIM and device with the UCC which would become a secondary SIM-bound device. 

Both the primary and secondary devices will be active given that both are within a proximity of 100 metres. Trading can be done through any one of the devices at any given point in time.

In case of change and loss of mobile device, SEBI said that a fall back mechanism shall be put in place to enable continuity in trading. In such a case, the user can revoke the existing SIM/device and reperform KYC to link a new SIM and device. 

Explaining the rationale behind the proposal, the market regulator said that the authentication mechanism needs to be strengthened in order to ensure that only authorised users execute the trades and curb any unauthorised transactions. 

“The proposed provisions will be applicable to all the stock brokers in a phase manner. Initially, top 10 qualified stock brokers would be required to implement these provisions and put in place the technology based requirements to enable it,” the consultation paper said.

It also mentioned that initially it would be optional for the investors to opt for the proposed secure authentication mechanism and then in phases, the proposed framework would be made mandatory to access the trading accounts.

SEBI has invited comments on the proposals by March 11. 

The development comes at a time when the country’s stock investment landscape is changing rapidly, with a number of new customers being added to the markets every month. This increase has come on the back of increasing personal financial awareness and improved internet access. New-age tech startups like Zerodha, Groww, and Dhan have also played a key role in this.

Currently, Groww has the highest number of active clients in the country, followed by Zerodha. Overall, the country’s investment tech market is expected to clock a CAGR of 29% from 2024 to 2030 to reach a size of $74 Bn by the end of the decade.