Market regulator, the Securities and Exchange Board of India (SEBI), has issued a new circular that lays down guidelines that allow the nominee of a deceased investor to seamlessly transfer shares of the original investor to their names.
In the case of the demise of an investor, family members or nominees face many hurdles in getting shares the investor held. Transferring these securities to the legal heirs is crucial as it safeguards the family's financial future. To make this process smoother, SEBI has introduced a centralised procedure to claim shares and mutual fund units seamlessly. This new framework will come into effect from 1 January 2024.
What steps need to be taken by nominees?
As per SEBI circular, nominees can report an investor's death through KYC Registration Agencies (KRA) along with the deceased investor’s death certificate and PAN.
Upon verifying these documents, all debit transactions (meaning any outflows or selling of shares) in the deceased investor’s account will be halted to prevent unauthorised or erroneous transactions.
Within five days of the verification of death, the concerned family member or nominee will receive guidance on the steps and procedures to transfer the shares. Also, the KYC (Know Your Customer) status of the deceased investor will be updated to “Blocked Permanently“. This ensures no further activity can happen under the deceased person’s name.
The death of an investor can be reported by joint account holder(s), nominee(s), legal representative, and family members.
This new regulation aims to standardise and speed up the share transfer process after an investor’s death. As per SEBI, this new rule is expected to significantly reduce the time and challenges previously faced by grieving families.