Sebi Introduces Centralised Reporting Mechanism For Cases Involving Investor’s Death

The Securities and Exchange Board of India (Sebi) has announced a centralized reporting and verifying mechanism to streamline the securities transmission process in case of the demise of investors. Its October 3 circular outlines the norms and obligations of regulated entities, including registered intermediaries, such as brokers and exchanges with an "interface" with investors or the "account holders". Listed companies seeking access to this centralized mechanism for their investors holding physical securities can connect with the KYC Registration Agency (KRA) through their Registrar and Transfer agents (RTAs).

Investors can benefit from this mechanism for dematerializing securities. Sebi has mandated that the KRAs establish uniform systems, protocols, and procedures by January 1, 2024.

Obligations of Intermediaries

Upon receiving information about the investor's demise from joint account holders, nominees, legal representatives, or family members, the concerned intermediary must swiftly obtain their death certificate and PAN. Verification of the death certificate must be completed within the next working day, Sebi said.

In cases where the intermediary cannot access or obtain the death certificate, it must notify the nominees of the investor's "On Hold" KYC status and request the death certificate. When the death certificate is duly received and updated, the intermediary should update the status in the KRA system.

Updation of Records and KYC Modification

Upon verifying the death certificate, the intermediary must, on the same day, submit a 'KYC modification request' to the KRA and upload relevant documents. All debit transactions in the account or folios of the deceased investor must be blocked. However, if the intermediary learns from an investor that the information is false, an update should be made to KRA on the same day.

When the death certificate is not yet received, the intermediary should submit a 'KYC modification request' stating "information on the death of investor received; confirmation awaited" to the KRA.

Roles of the KRA

Upon receiving a 'KYC modification' request from the intermediary, it must perform independent validation and verification in one day and update the KYC record as "Blocked Permanently" in the system. The KRA will also flag the KYC of the investor as "On Hold" for requests received when confirmation is awaited, as mentioned above. If errors or issues arise, the KRA will consult with the concerned intermediary to rectify them.

The release said that once the accounts are blocked permanently, the intermediary shall take the necessary steps to transmit the investment within five days.

Intermediaries should then inform about the procedure for transmission and provide the transmission request form and the list of documents required for the transmission. In the case of joint accounts, the intermediary shall intimate the surviving joint account holder.