Soon after assuming office, M
Damodaran, the new chairman of Sebi, extended the earlier deadline of 31 March 2005 for getting registered with the regulator’s Central Database of Market Participants and Investors’ Integrated (MAPIN) and obtaining the mandated Unique Identification Number (UIN) to 31 December 2005.

Sebi’s decision follows representations received from various investor groups and associations on the difficulties faced by them in registering with the database.

The extension has come as a welcome because the regulator had made it clear that, post-deadline, those without a MAPIN-UIN card will be barred from dealing in the stock market. In November 2003, Sebi had issued a diktat, making it mandatory for brokers, market intermediaries and individual investors whose transactions exceed Rs one lakh at a time to obtain a UIN under section 11(1) of the Sebi Act as a requirement to trade in the stock market. About 1.48 lakh individuals and 52,000 corporates and intermediaries have got themselves registered with the database.

To register, an investor has to get in touch with one of the six Point of Service (POS) agents recruited by the National Securities Depository (NSDL), the designated service provider and the executing agency to create and maintain the MAPIN database, to obtain an application form. He has to submit the completed form with Rs 300 as registration fee, along with proof of identity and proof of residence. A photo-copy of his Permanent Account Number (PAN) card has to be attached to the application form.

As the MAPIN process is based on the biometric system, individuals wanting a UIN have to get themselves photographed, besides getting their finger-prints and their signatures live-scanned. The biometric impression of the individual’s left thumb, left index finger, right thumb and right index finger is captured electronically. Following this, he is issued a MAPIN card in two weeks.

Yet another welcome news is that NSDL is increasing the number of intermediaries empowered to provide MAPIN registration, from the current six, to ease the pressure.

Sebi and NSDL have been fairly low-key in building the database, with hardly any public awareness. The project requires more visibility, either through the print or the electronic media. NSDL now plans to start a helpline for investors who are not clear about the MAPIN procedure or those who need help in their MAPIN-related queries. NSDL has also promised special service to senior citizens and physically-challenged investors by completing their MAPIN process at their homes. Sebi, too, needs to launch an information campaign to explain the investing public about the system and reassure them about its security features.

Once the database is set up, Sebi will have complete access to a comprehensive profile of investors, who will, in turn, benefit by accessing basic information about the intermediary they are dealing with and check if it faces any disciplinary action. On the flip side, intermediaries can verify the client’s identity from the database.

MAPIN is more like an omnipotent weapon for Sebi’s investigation and surveillance and will help the regulator track market actions. Sebi claims that it remains largely unaware of the entities behind a particular trade due to the persistent problem of multiple or benami demat accounts. The information in the MAPIN databse, feels Sebi, will allow it to track down the entities and operators behind the price movement of a stock and make it difficult for operators to accumulate positions in a stock using multiple demat accounts and brokers.

Yet, some investors and intermediaries are opposed to the very idea of having this kind of database. Though ambitious, the project looks unfeasible, administratively. This is because brokers, investment bankers and individual investors have to register along with their spouses, dependent children and dependent parents. In the case of proprietary and partnership firms, besides the employees, their relatives, too, have to obtain the UIN. Promoters and directors of companies, their siblings, spouses, children and parents also have to apply for UIN.

Soon after Sebi introduced the idea, National Stock Exchange Members Association (NSEMA) and the Association of NSE Members of India (ANMI) moved the Delhi High Court, challenging the rationale behind the move. The court first stayed the implementation of MAPIN, but later, exempted relations with no capital market dealings from obtaining the UIN.

Investor Grievances Forum (IGF) has also made an official presentation to Sebi on the shortcomings of the MAPIN project. The Confederation of Indian Industry (CII), too, has protested the MAPIN project. Mutual funds plan to move Sebi through the Association of Mutual Funds of India (AMFI) to get mutual fund investors exempted from the stipulation. Their contention is that a UIN seems premature at a time when mutual funds have been venturing into mofussil areas to extend their retail reach.

Sebi has formed a committee, chaired by Jagdish Kapoor, former deputy governor, Reserve Bank of India, to examine the objections to MAPIN, suggest future implementation and to review the cost of obtaining UIN.