Can family members claim money of a deceased investor? Know Sebi's rules

When an investor passes away, their family or nominees often face difficulties accessing the held shares. Fortunately, the Securities and Exchange Board of India (Sebi) has introduced a new mechanism for reporting an investor's death through the KYC Registration Agency. This updated framework will be effective from January 1, 2024.

As per the recent circular from Sebi on October 3, the markets regulator has established operational norms, outlining the responsibilities of regulated entities and registered intermediaries dealing with investors or account holders who are natural persons. Here's a breakdown of what you need to know:

Who Can Report the Death of an Investor? The death of an investor can be reported by:

• Joint Account Holder(s)

• Nominee(s)

• Legal Representative

• Family Members

Required documents: Death certificate and PAN

Upon receiving information about the investor's demise, the concerned intermediary must obtain the death certificate and PAN from the notifier or nominee. The death certificate must be verified through online or offline modes.

If the intermediary is unable to obtain the death certificate, they must inform the nominee that the KYC status of the deceased investor is flagged as "On Hold" and request the submission of the death certificate.

After verifying death-related documents: Upon validation of the death certificate, the KYC Registration Agency (KRA) will update the KYC record as 'Blocked Permanently' in the system and notify all linked intermediaries.

Upon receiving the 'Blocked Permanently' notification, all intermediaries will:

• Block all debit transactions in the account of the deceased investor on the same day of verification.

• Notify the family member, nominee, or notifier within 5 days about the procedure for transferring shares.

If the death certificate is not received, the concerned intermediary must submit a KYC modification request in the KRA system by the next working day, stating "information on death of investor received; confirmation awaited."

Listed companies providing access: Listed companies can offer beneficial access to this centralized mechanism for investors holding securities in physical form. They can establish connectivity with KRA through their RTAs, according to the latest Sebi circular.

Uniformity in rules: To ensure consistency in implementing the mechanism, Sebi has urged stock exchanges, depositories, and industry associations to establish common Standard Operating Procedures (SOP) in consultation with stakeholders, including KRAs. These SOPs will be available on their websites as well as those of the intermediaries.

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