Centralized Reporting for Investor Demise through KRAs
In order to streamline the transmission process in the securities market, a centralized mechanism for reporting and verification in the event of an investor’s demise has been implemented. This circular outlines the operational norms and the obligations of various regulated entities, such as registered intermediaries who interact with investors or account holders.
Introduction
The purpose of this circular is to introduce a centralized mechanism for reporting and verifying the demise of an investor. The goal is to facilitate smoother transmission processes in the securities market. Regulated entities, including registered intermediaries, have specific obligations in relation to investors who are natural persons.
Eligibility for Listed Companies
Listed companies that wish to grant beneficial access to this centralized mechanism to their investors, who hold securities in physical form, are eligible to establish connectivity with the KRA through their RTAs.
Steps for Verification of Death Certificate
Upon receiving notification of an investor’s demise from a joint account holder(s), nominee(s), legal representative, or family member, the concerned intermediary must obtain the death certificate and PAN from the notifier. The following steps should be followed:
Step 1: Verification of Death Certificate
The intermediary must verify the death certificate by either checking it online through the website of the issuing Government authority or conducting an OSV (Original Seen and Verified) process. The OSV process confirms the authenticity of the death certificate accompanied by the PAN of the deceased investor, which is received electronically from the notifier. The validation report from an Investor Service Centre (ISC) of the Stock Exchange or Depository should be treated as equivalent to the intermediary’s own OSV.
Step 2: Documentation and Record Keeping
The intermediary must record and retain a self-certified copy of the proof of identity, relationship with the deceased investor, and contact details of the notifier.
Steps for Cases Without Access to Death Certificate
If the concerned intermediary does not have access to the death certificate or is unable to obtain it, the following steps should be taken:
Step 1: Intimation and Request for Death Certificate
The intermediary should notify the investor, notifier(s), or nominee(s) that the KYC status of the investor has been flagged as “On Hold” and request them to provide the death certificate of the deceased investor.
Step 2: Verification and Updation
Upon receipt of the death certificate, the intermediary should follow the steps mentioned in paragraph 3 above for the verification process.
Obligations of Intermediary – Updation of Records
After verifying the death certificate, the concerned intermediary should execute the following actions on the same day:
Step 1: KYC Modification Request
The intermediary should submit a “KYC modification request” to the KRA, stating that the information on the investor’s death has been received and the death certificate has been verified. Relevant documents should also be uploaded.
Step 2: Blocking of Debit Transactions
All debit transactions in the account/folios of the deceased investor should be blocked by the intermediary.
Transmission of Assets and Intimations
Upon receipt of the notification from the KRA stating that the investor’s KYC record has been updated as “Blocked Permanently,” all intermediaries must:
Step 1: Blocking of Debit Transactions
Immediately block all debit transactions in the account/folios of the deceased investor, as mentioned in paragraph 5b.
Step 2: Intimation and Transmission
Within 5 days, the intermediary should notify the notifier/nominee about the procedure for transmission, provide the transmission request form, and furnish the list of documents required for the transmission. In the case of joint accounts, the surviving joint account holder(s) should be informed accordingly.
Transaction Requests in “On Hold” Accounts/Folios
If any transaction request is received by an intermediary in an account/folio that has been flagged as “On Hold” following the procedures mentioned in paragraph 4 or 7, the intermediary should conduct additional due diligence before allowing the transaction. This may include video calls with the investor or In-Person Verification (IPV) to confirm that the investor is alive.
False Intimations of Investor Demise
If the intermediary establishes contact with the investor and confirms that the information about the investor’s demise is false, a “KYC modification request” should be submitted in the KRA system on the same day, stating that the intimation of the investor’s death is false. Additionally, a report of the additional due diligence conducted should be uploaded. The KRA will revert the KYC status to “Clear or Validated” and update all linked intermediaries accordingly, on the same day.
Other Obligations and Common SOP
All intermediaries who have accounts or folios of deceased investors, as updated by the KRA, should submit data regarding the intimation of transmission and its outcome to SEBI, in the prescribed format. Standard Operating Procedures (SOP) will be put in place by Stock Exchanges, Depositories, and industry associations in consultation with stakeholders, including KRAs, to ensure uniformity in operationalizing this circular. The SOP will be available on their websites as well as the websites of the intermediaries.
Effective Date and Regulatory Authority
This circular will come into effect on January 1, 2024. It has been issued under the powers conferred by Section 11 (1) of the Securities and Exchange Board of India Act, 1992, with the aim of protecting the interests of investors and regulating the securities market.
Disclaimer:
Estabizz Fintech compiled the material in this article using the most recent Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and material applicable at the time. They ensured the completeness and correctness of the material through due diligence. When using this material, users must consult the relevant, applicable legislation. The given data may change without prior notice and does not constitute professional advice. Estabizz Fintech disclaims all liability for any results from the use of this material.
