The Securities and Exchange Board of India (Sebi) has eliminated the provision mandating the freezing of folios lacking PAN cards, know-your-customer (KYC), and nomination details for all holders of physical securities. Sebi’s November 17, 2023 announcement comes as investors and the Registrar and Share Transfer Agents (RTAs) raised concerns regarding the freezing of folios. The change will take effect immediately, Sebi stated in a circular.
Background
Sebi had earlier introduced simplified norms for managing investor service requests and providing PAN, KYC details, and nominations. However, this directive was retracted after the Master Circular was issued for Registrar and Share Transfer Agents in May 2023.
The initial objective was to simplify the processing of investor service requests handled by RTAs. However, concerns arose from the Registrars' Association of India and investor feedback, particularly regarding the freezing of folios and the referral of these folios to authorities by RTAs under the Benami Transactions (Prohibitions) Act, 1988 and Prevention of Money Laundering Act, 2002.
What Has Changed?
In response to these concerns, the following revisions were made to the Master Circular.
The term 'freezing/frozen ' has been deleted. "It shall be mandatory for all holders of physical securities in listed companies to furnish PAN, Nomination, Contact details, Bank A/c details and Specimen signature for their corresponding folio numbers. The folios wherein any one of the cited document/details above are not available on or after October 1, 2023, shall be frozen by the RTA," the circular said.
Hence, the folios must also be referred to the administering authority by RTAs and listed companies under the acts mentioned above. "Frozen folios shall be referred by the RTA / listed company to the administering authority under the Benami Transactions (Prohibitions) Act, 1988 and/or
Prevention of Money Laundering Act, 2002, if they continue to remain frozen as of December 31, 2025," the Master Circular earlier read.
Sebi has instructed stock exchanges, depositories, RTAs, and listed companies to comply with this change and adjust their relevant regulations and operational instructions accordingly.
