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Corporates lag in getting unique ID — May find markets out of bounds

Veena Venugopal

Mumbai , Dec. 29

OVER two-thirds of corporates who invest in the stock markets or mutual funds may not be able to transact after December 31, as the Securities and Exchange Board of India's deadline for its unique identification number exercise ends in the next two days.

According to the SEBI circular issued in August this year, all corporates, including their directors and promoters, must submit their details and get themselves fingerprinted and have a unique identification number (UIN) assigned to them, if they wish to continue trading after December 31.

As of today, 19,132 corporates have got their UIN, according to data from National Securities Depository Ltd (NSDL), which is in charge of issuing these identification numbers. NSDL estimates that at least 60,000 entities have to avail themselves of the UIN as per the SEBI guideline, indicating that over two-thirds of these entities will not be qualified to trade as on January 1, 2005.

Sources at SEBI say that they have not taken any steps so far to postpone this deadline.

Even among those corporates, which have got their UIN, several have not met the second criteria of obtaining a separate UIN for all their promoters and directors. Several corporates have made representations to NSDL and SEBI about the difficulty of getting their directors, especially those living abroad, fingerprinted.

Sources close to the exercise say that SEBI may take a "kind view" on directors who are abroad, or who are foreign nationals not located in India. SEBI is expected to announce that these individuals have to comply with this requirement on their first visit to India after January 1, 2005.

In fact, the total number of individuals who have obtained their UIN is around 71,000. Over 43,000 of these are market intermediaries, like brokers, who obtained their UIN by June 30, 2004. According to NSDL data, this indicates that less than 28,000 promoters and directors have got their UIN, a ratio of less than two promoters or directors for each of the 19,132 corporates. This indicates that even those corporates that have got their UIN may not have complied fully with the regulation.

Though SEBI issued this requirement in August, NSDL says that corporates were sluggish in complying. With the deadline closing in, NSDL is issuing 1,200 - 1,500 UINs since last week.

Though there is no penal action on corporates that trade without the UIN, stock exchanges have the right to disallow these transactions. The BSE and NSE are awaiting SEBI's directions on whether these transactions should be allowed or not, post the cut off date.

Corporates, including their promoters and directors, who do not invest directly in the securities market, but invest in mutual funds, also have to comply with this requirement.

However, trusts and other non-corporate associations of persons, have time till March 31, 2005 to obtain their UIN. This is also true for foreign institutional investors and their sub-accounts. Retail investors also have to quote their UIN on all trades and mutual fund transactions over Rs 1 lakh from April 1, 2005.

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