Sebi floats consultation paper to improve Account Aggregator framework

Sebi on Tuesday came out with a proposal on collating and defining use cases of Financial Information Users (FIUs) in the Account Aggregator framework in securities markets.

This is aimed at improving the safeguards within the Account Aggregator or AA framework to curb misuse of the financial information in frauds and mis-selling.

An Account Aggregator, a RBI-regulated Non-Banking Finance Company (NBFC), helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network.

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 said that there could be certain situations in the securities market when "financial information" of a client could be sought using the AA framework. These includes 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.

Sebi 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; 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 added.

The regulator has sought public comments till August 31 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 which may be included under the ambit of the AA framework.