The Securities and Exchange Board of India (Sebi) has introduced a centralised mechanism for reporting and verifying investor demise, aimed at streamlining the process of transferring assets and securities in the event of an investor’s death. This new mechanism will come into effect from January 1, 2024.
In an effort to make the transmission process in the securities market more efficient, Sebi has established operational norms and obligations for regulated entities, particularly registered intermediaries that interact with individual investors or account holders. The regulator issued a circular outlining the procedures to be followed when an investor passes away.
According to Sebi’s guidelines, when an intermediary receives notification of an investor’s demise, it must promptly obtain the death certificate and the deceased investor’s Permanent Account Number (PAN) from the notifier or nominee. The intermediary is then required to verify the death certificate on the next working day, using either online or offline methods.
The circular states that the intermediary should consider the “Original Seen and Verified” (OSV) status of the death certificate, along with the PAN of the deceased investor, to be equivalent to its own OSV. If the intermediary lacks access to the death certificate or is unable to obtain it, they must inform the nominee(s) that the investor’s KYC status has been placed “On Hold” and request them to provide the necessary death certificate.
Once the death certificate has been verified, the intermediary is obliged to submit a KYC modification request to the KYC Registration Agency (KRA) on the same day. This request should state that “information on death of investor received; death certificate verified” and include the relevant documents.
Additionally, the intermediary must block all debit transactions in the account or folios of the deceased investor. If the death certificate is not received, the intermediary must submit a KYC modification request to the KRA system, stating “information on death of investor received; confirmation awaited,” by the next working day after receiving the notification.
The KRA, upon receiving the KYC modification request from the intermediary, is responsible for conducting independent validation and verification within the next working day. Once the death certificate has been validated, the KRA will update the KYC record as “Blocked Permanently” in the system and notify all linked intermediaries.
To ensure consistency in the operationalization of these procedures, Sebi has urged stock exchanges, depositories, and industry associations such as the Association of Mutual Funds in India (AMFI) and the Registrars Association of India (RAIN) to collaborate with stakeholders, including KRAs, in establishing common Standard Operating Procedures (SOPs). These SOPs should be made accessible on their respective websites as well as those of the intermediaries.
Overall, Sebi’s centralised mechanism for reporting and verifying investor demise aims to simplify and expedite the process of transferring assets and securities when an investor passes away, providing greater clarity and efficiency in dealing with such situations in the securities market.