Positive confirmation

Normally an address is proved with paper. You hand over a bill or an Aadhaar card, and the address printed on it becomes the address on your file.

The SARAL account route lets a small cash-segment investor skip that step for the address he actually lives at. He simply declares it. No proof is asked for.

Something still has to stand in for the missing document. That something is positive confirmation.

The idea is simple. Instead of reading a piece of paper about the address, the intermediary gets a response from the address. Post something and get a signed acknowledgment back. Ring the number and speak to the person. Or go and look.

The word positive is doing real work here. Silence is not confirmation. Something has to come back.

The rule (Chapter 7, section 7.3, item b). Where a SARAL client's documentary proof of address is not the address at which he is currently residing, the intermediary may take a declaration of the residence or correspondence address on which all correspondence will be made, and no proof is required for that address. The declared address, and any change of it, may be verified by the intermediary through positive confirmation such as:

1. acknowledgment of receipt of the Welcome Kit, or of the dispatch of contract notes, or of any periodical statement;
2. telephonic conversation;
3. visits.

The workbook writes both the first and the third item with etc., so this is an illustrative list of three examples rather than a closed set of three permitted methods.

When it has to be done again. If the client relocates, he may intimate the new correspondence address within two weeks of the change — and the same positive confirmation applies to the new address.

The hard backstop. Positive confirmation is not the only control on a declared address. Where the client has given an address other than the one in his officially valid document, the registered intermediary must forward the KYC completion intimation letter by registered post, speed post or courier to that address. If the letter comes back — wrong or incorrect address, addressee not available — then:

• no transactions shall be allowed in that account;
• intimation shall be sent to the stock exchange and the depository; and
• the intermediary and the KRA flag such accounts in their records and systems.

So a returned letter is a negative result with teeth. It freezes the account rather than leaving a gap in a file.

What the workbook does not give. No time limit for completing positive confirmation, no minimum number of attempts, no prescribed record format, and no rule that one particular method must be used. Only the methods themselves are specified. If a question asks within how many days positive confirmation must be obtained, Chapter 7 supplies no figure — the deadlines in this part of the chapter belong to other obligations.

The confirmation letters that are not this. Two of those other deadlines sit within a page of it and get examined against it. The intermediary uploads the KYC information to the KRA within 3 working days of completing the KYC process (section 7.5). The KRA then sends the client a letter within 2 working days of receiving the initial or updated KYC documents from the intermediary, confirming the details and keeping proof of dispatch (section 7.5.1). Neither of those is positive confirmation.

Illustrative intermediary and clients.

Sahyadri Stock Broking, a Pune broker, opens four SARAL accounts in one week. Each client trades the cash segment only — no internet trading, no margin trading, no derivatives and no power of attorney — and each gives one documentary proof of address plus a declared correspondence address with no proof at all.

For Mr Rane the consequence is not a pending item on a checklist. No transactions are allowed in his account. Sahyadri intimates the stock exchange and the depository, and both Sahyadri and the KRA flag the account.

Nine months later. Mr Shinde moves from Kothrud to Hadapsar on 4 August. He may intimate the new correspondence address within two weeks — by 18 August. Sahyadri takes a fresh declaration, again without documentary proof, and runs positive confirmation on the new address: the next monthly statement goes to Hadapsar and the acknowledgment comes back signed on 29 August.

A purchase in between. On 7 August Mr Shinde buys 250 shares at Rs 1,840:

Contract value = 250 x Rs 1,840 = Rs 4,60,000

The contract note for that trade is one of the documents whose dispatch and acknowledgment the workbook itself lists as positive confirmation. The ordinary paperwork of a live account therefore keeps confirming the address as a by-product of trading — which is exactly why the list names contract notes and periodical statements at all.

What positive confirmation did not do. It never established who Mr Shinde is. His identity rests on PAN, proof of identity and in-person verification or video IPV. Positive confirmation answers a narrower question: does this client actually receive post, calls or visitors at the address he declared?

Chapter 7 (SEBI Guidelines for KYC Norms in Securities Market), section 7.3 — the SARAL section — is the only place the paper uses the term. It is a three-line provision, which is precisely why it yields clean factual questions: what may be used as positive confirmation (acknowledgment of the Welcome Kit or of the dispatch of contract notes or a periodical statement, a telephonic conversation, or visits), what it is used for (verifying the declared residence or correspondence address and any change of it), and what follows when the intimation letter comes back undelivered (no transactions, with intimation to the stock exchange and the depository).

Because section 7.3 is short, a question will often test the neighbouring items in the same paragraph as part of the same scenario — the single documentary proof of address, and the two weeks to intimate a change.

• Positive confirmation verifies the address, not the identity. Identity is PAN plus proof of identity plus IPV or video IPV. Mixing the two is the commonest error on this section, because a visit and a video call both involve seeing the client.
• Three examples, not three permitted methods. The workbook attaches etc. to the first item and again to visits, so the list is illustrative. A plausible fourth method is not automatically wrong.
• The first item is one example, not three. Welcome Kit, contract notes and periodical statements sit inside a single numbered item, separated by slashes. Counting them separately gives five where the workbook shows three.
• It substitutes for proof of the declared address only. The SARAL client still submits one documentary proof of address, and the officially valid document is untouched.
• A returned intimation letter blocks the account. No transactions, and both the stock exchange and the depository are told — not the exchange alone. The account is then flagged by the intermediary and the KRA.
• Two weeks to intimate a change of address — not one month and not 30 days.
• Do not confuse it with the KRA's confirmation letter. The KRA writes to the client within 2 working days of receiving the KYC documents to confirm the details and keeps proof of dispatch. That is a KRA duty under section 7.5.1, not positive confirmation by the intermediary — whose own KRA upload deadline is 3 working days.
• Nor with the third-party address route. A third-party correspondence address is permitted only if full KYC and Rule 9 due diligence are completed on the third party. A SARAL declaration is the client's own address, verified by positive confirmation instead of paper.
• This is not the auditing sense of the phrase. In auditing, positive confirmation means asking a third party to reply either way about a balance. Series XXIV does not use the term in that sense anywhere.