Securities and Exchange Board of India (SEBI) is responsible for overseeing the regulation of all participants in the Indian capital market. It tries to safeguard investors’ interests and grow capital markets by implementing a variety of laws and regulations. In the wake of increasing frauds related to the share market, SEBI has been trying to make regulations more robust to protect investors. In this regaird, the most tricky aspect for SEBI to deal with has been fraud related to unclaimed shared and unclaimed dividends, especially in the physical shares format. This change will help reduce the danger of fraud and manipulation in the physical transfer of securities by unscrupulous individuals. Furthermore, holding shares in demat form simplifies and secures transactions for investors. With that in mind, SEBI recently released a new notification.
SEBI ISSUES NOTIFICATION FOR INVESTOR PROTECTION
SEBI issued Circular No. SEBI/HO/MIRSD/MIRSD RTAMB/P/CIR/2021/655 on November 3, 2021, outlining the common and simplified norms for Registrar & Share Transfer Agents (RTAs) to process any service request from shareholders, as well as providing an electronic interface for RTAs to process investor queries, complaints, and service requests.
In the same circular, SEBI also detailed the forms for physical shareholders to submit requests for registration, changes/updates of PAN, KYC, nomination, and banker’s attestation of the shareholder’s signature in the case of a substantial discrepancy in the shareholder’s signature.
The furnishing of PAN, email address, mobile number, bank account details and nomination by holders of physical securities has now been mandated by SEBI. Folios wherein any one of the cited documents/details are not available on or after April 01, 2023, shall be frozen by the Registrars and Transfer Agent of the Company (RTA) and you will not be eligible to lodge a grievance or avail service request from the RTA and will not be eligible for receipt of dividend in physical mode.
SHOULD YOU BE ALARMED?
If you are a physical shareholder, here’s how the notification could impact you.
- The RTA shall not process any service requests or complaints received from the holder(s)/claimant(s), till PAN, KYC and Nomination documents/details are
- Frozen folios shall not be eligible for any payment including dividend, interest or redemption payment in physical mode. Such payments shall be made only through electronic mode, upon complying with the requirements of furnishing all the cited documents/details.
- Securities in the frozen folios shall be referred by the RTA/Bank to the administering authority under the Benami Transactions (Prohibitions) Act, 1988 and/or Prevention of Money Laundering Act, 2002, if they continue to remain frozen as on December 31,
TRACK IT AND GET IT RIGHT
As mandated by the circular, in order to avoid folio freezing, holders of physical securities are urged to update the following details/documents with their respective RTA, as soon as possible, if they have not already done so:
- Valid PAN
- KYC Details (Postal address with PIN, Mobile number, E-mail address, Bank account details, Specimen signature)
- Nomination details
- Linking of PAN with Aadhar number
These documents can be sent directly to the RTA in any of the following manners:
- Shareholders can submit their needed documentation to RTA regional offices around the country via ‘In Person Verification’ (IPV).
- Shareholders can send duly self-attested and dated physical copies of the essential documentation to the RTA’s
- Shareholders can provide the appropriate papers via E-sign from their registered email address, as per SEBI’s
Alternatively, holders of tangible securities can have their shares dematerialized to avoid having their folios frozen. As per the SEBI guidelines, it takes approximately 21 days for the demat process to complete; however, it may vary in the case of some companies.
CONFUSED? WE ARE HERE TO GET YOU SORTED !
If all the above sounds a bit complicated to understand, don’t worry; the team at Infiny Solutions is always available at your beck and call to safeguard your interests as an investor. We help simplify the process and make it easy for you to keep up with the ever-evolving regulatory landscape. Our team makes it convenient for you by collecting the relevant information and documents from your home and get everything processed while you sit comfortably at home.