The Securities and Exchange Board of India (SEBI) has called for public input on the proposal to define and compile use cases of Financial Information Users (FIUs) in the Account Aggregator (AA) framework within the securities markets. The regulator’s objective is to strengthen safeguards in the AA Framework to safeguard customer interests, prevent data breaches, and counter potential misuse of financial information.
The Account Aggregator framework, regulated by the Reserve Bank of India (RBI), facilitates secure and digital access to financial information for individuals, enabling them to share data from one financial institution to another within the AA network. Notably, Account Aggregators cannot access or store customer data due to end-to-end encryption, ensuring a secure data-sharing process.
The consultation paper highlights hypothetical scenarios in which financial information may be sought through the Account Aggregator framework. For instance, Registered Investment Advisers (RIA) or Registered Portfolio Managers might seek information on a client’s portfolio or financial assets to devise a financial plan. Additionally, the AA framework may be used for the verification of bank accounts during the client onboarding process by intermediaries.
SEBI emphasizes the importance of improving safeguards within the Account Aggregator framework to combat unsafe practices adopted by consumers. These practices include sharing confidential information, providing access to financial information to third parties, or authorizing third parties to operate their accounts. Such unsafe practices can lead to frauds, misappropriation of funds or securities, and mis-selling of financial products and services.
In light of these challenges, SEBI has called for public comments until August 31. The regulator seeks insights on whether any intermediaries in the Indian securities market should be excluded from functioning as FIUs, major potential use cases for the AA framework for SEBI regulated entities, and additional categories of financial information that should be included within the ambit of the AA framework.
The public’s inputs are crucial in shaping the future of the AA framework, enhancing data security, and curbing potential misuse of financial information, fostering a safer and more resilient securities market in India.