In an effort to strengthen security in the stock market, the Securities and Exchange Board of India (SEBI) has proposed a SIM-binding authentication mechanism to prevent unauthorized access and transactions in investors’ trading and demat accounts.
The new framework, inspired by the authentication process used in Unified Payments Interface (NASDAQ:TILE) (UPI) transactions, aims to ensure that only registered users can access their trading accounts. Under this system, a trading account can only be logged into if the unique client code (UCC) matches the linked mobile device and SIM, significantly reducing the risk of fraudulent activities.
SEBI released a draft consultation paper on this proposal and has invited public feedback until March 11, 2025. According to the regulator, this initiative will help create a more robust and secure authentication process for mobile-based trading platforms, ensuring investors’ accounts remain safeguarded from unauthorized logins.
Under the proposed framework, the registered mobile device will act as the key to access trading accounts. Investors will be required to complete biometric authentication on their primary device to add an extra layer of security.
For users who prefer logging in on other devices, such as desktops or laptops, SEBI plans to introduce a QR code-based, time-sensitive authentication mechanism, similar to the multi-factor authentication used by social media platforms. This will ensure that even if an investor tries to log in from a different device, they must authenticate through a linked mobile device first.
SEBI also acknowledges scenarios where investors might lose or change their primary mobile device. To address this, the framework includes a fallback mechanism that allows users to regain access while preventing unauthorized users from exploiting lost or stolen devices. Additionally, a feature to temporarily lock the trading account will be introduced to further enhance security.
For investors who share a mobile number with family members, SEBI will allow multiple UCCs to be linked to the same device, provided all users are authorized account holders.
The regulator has proposed a phased rollout, with the top ten qualified stockbrokers being the first to implement the system. Initially, investors will have the option to voluntarily opt-in before SEBI considers making it mandatory across all brokers.
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