SEBI Eases Rules for Physical Securities’ Holders Without PAN, KYC Details
In a move towards simplifying regulations, the Securities and Exchange Board of India (SEBI) has announced the elimination of the requirement to freeze folios of physical securities for holders without PAN, KYC details, and nomination. This decision, effective immediately, aims to streamline the process for investors and reduce administrative burdens.
Background and Justification
SEBI’s decision to ease the rules for physical securities’ holders without PAN, KYC details, and nomination comes after careful consideration and feedback from various stakeholders. The Registrars’ Association of India and investors provided input highlighting the challenges and complications associated with the previous requirements.
Under the previous rule, holders of physical securities in listed companies were obliged to provide PAN, nomination, contact details, bank account details, and specimen signature for their corresponding folio numbers. Failure to comply with these requirements would have resulted in the freezing of the folio by the Registrars to an Issue and Share Transfer Agents (RTA) starting from October 1, 2023.
Revision of the Circular
In response to the feedback and concerns expressed by industry stakeholders and investors, SEBI has amended the circular issued in May. The critical change is the removal of the term ‘freezing/frozen’ from the requirement. This modification aims to mitigate unintended challenges that may arise from freezing folios and referring them to the administering authority under the Benami Transactions (Prohibitions) Act, 1988, and/or Prevention of Money Laundering Act, 2002.
Implications and Future Scenario
The amended regulations now grant relief to physical securities’ holders by eliminating the need to provide PAN, KYC details, and nomination for their folios. This move is expected to simplify the process for investors and reduce administrative hurdles.
Furthermore, frozen folios will no longer need to be referred by the RTA or listed companies to the administering authority under the Benami Transactions (Prohibitions) Act, 1988, and/or Prevention of Money Laundering Act, 2002, if they remain frozen beyond December 31, 2025. This change offers flexibility and avoids unnecessary complexities for both investors and market participants.
In conclusion, SEBI’s decision to ease the rules regarding PAN, KYC details, and nomination for physical securities’ holders demonstrates a commitment to enhancing the efficiency and accessibility of the capital markets. By addressing the concerns expressed by stakeholders and streamlining regulations, SEBI aims to promote a more investor-friendly environment.
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