SEBI Simplifies Norms to Access Unclaimed Amount in REITs, InvITs, Debt Securities

Introduction:

The Securities and Exchange Board of India (SEBI) has introduced detailed procedures for dealing with unclaimed funds of investors lying with entities having listed non-convertible securities, REITs and InvITs. SEBI has also put in place a mechanism for claiming such unclaimed amounts by investors. The new framework will become effective from March 1, 2024, according to two circulars released by SEBI. This move is aimed at reducing the complexities and streamlining the claim process for investors.

Background and Need for Simplification

Before delving into the details of SEBI’s new framework for accessing unclaimed amounts in REITs, InvITs, and debt securities, it is important to understand the background and the reasons behind this simplification.
SEBI, as the capital markets regulator in India, has a crucial role in protecting the interests of investors. Over time, it has become apparent that unclaimed funds lying with entities, such as REITs, InvITs, and listed entities with non-convertible securities, pose a challenge to the efficient functioning of the market. These unclaimed amounts can cause disruptions and create complications for both investors and the entities holding the funds.
To address these challenges, SEBI recognized the need for a standardized and streamlined process for accessing unclaimed amounts, ensuring ease and convenience for investors while maintaining the integrity of the market. As a result, amendments to the rules were approved, paving the way for the introduction of the new framework.

SEBI’s Framework for Dealing with Unclaimed Funds

SEBI has released three separate circulars outlining the detailed procedures for handling unclaimed funds in REITs, InvITs, and listed entities that are not companies. The provisions of these circulars will come into effect from March 1, 2024. Let’s take a closer look at the key aspects of the framework:

1. Defining the Manner of Handling Unclaimed Amounts: SEBI has provided clear guidelines on how unclaimed amounts should be dealt with by REITs, InvITs, and listed entities in their escrow accounts. This ensures transparency and uniformity in the process.
2. Transfer of Unclaimed Amounts to IPEF: As per the new rule, any amount remaining unclaimed in the escrow account for a period of seven years will be transferred to the Investor Protection and Education Fund (IPEF). This step aims to safeguard the unclaimed funds and provide a mechanism for investors to access their rightful share.
3. Standardization of Claim Process: SEBI has also standardized the claim process for investors. Investors can approach the respective debt-listed entity, REIT, or InvIT to claim their unclaimed amounts. By having a streamlined process, investors can navigate the claim process with minimal disruptions and delays.
4. Investor Convenience and Ease: The overarching objective of SEBI’s framework is to ensure investor convenience and ease in accessing their unclaimed funds. By providing a uniform process and clear guidelines, SEBI aims to minimize the complexities and challenges associated with unclaimed amounts.

Impact and Implications

SEBI’s simplification of norms for accessing unclaimed amounts in REITs, InvITs, and debt securities carries several implications for investors and market participants:

1. Enhanced Investor Protection: The framework strengthens investor protection by establishing a clear procedure for accessing unclaimed amounts. Investors can now feel more secure in accessing their rightful share.
2. Reduction in Disruptions: With a standardized procedure, investors can expect fewer disruptions and delays in claiming their unclaimed amounts. This simplification ensures a smoother and more efficient process.
3. Transparency and Accountability: SEBI’s framework promotes transparency and accountability among entities holding unclaimed funds. The guidelines ensure that the unclaimed amounts are handled and transferred in a transparent manner, fostering trust in the market.
4. Market Efficiency: By streamlining the claim process, SEBI’s framework contributes to market efficiency. It reduces the burden on the entities holding unclaimed funds and facilitates the proper distribution of funds, aligning with the overall functioning of the capital market.

Conclusion:

SEBI’s new framework for accessing unclaimed amounts in REITs, InvITs, and debt securities is a significant step towards simplifying the claim process for investors. By establishing clear guidelines and a standardized procedure, SEBI aims to enhance investor convenience while ensuring the integrity and efficiency of the market. This initiative reinforces SEBI’s commitment to investor protection and sets a strong foundation for the future.

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