SEBI to Unveil Mechanism for Intermediaries Reporting on Demise of Investor from Jan 1

Markets regulator the Securities and Exchange Board of India (SEBI) has announced a centralised mechanism for reporting and verification via the KYC (Know Your Client) Registration Agency (KRA) to report the demise of an investor. 

The market regulator has also introduced operational norms, including the obligations of Regulated Entities (REs) and registered intermediaries that have interfaces with investors or account holders who are natural persons.

The new framework related to the mechanism for verification in case of the death of an investor will come into effect from January 1, 2024. 

The mechanism will work in the following way. After getting intimation related to the death of an investor, the concerned intermediary will be required to obtain the death certificate along with the Permanent Account Number (PAN) from the notifier or nominee and verify the death certificate via online or offline mode. 

In case the concerned intermediary is not in a position to obtain the death certificate after receiving information about the demise of the investor from the notifier or nominee, then it will have to inform the nominee that the KYC status of the deceased investor has been flagged off as ‘on hold’ and require them to furnish the death certificate of the concerned investor.

Once verification of the death certificate is done, the concerned intermediary will have to submit a KYC modification request to the KRA on the same day of verification that ‘information on death of investor received; death certificate verified’ and also upload the relevant documents. 

In addition, the intermediary will have to block all debit transactions in the account or folios of this particular deceased investor.

In case the death certificate is not received, the concerned intermediary will be required to, by the next working day of the intimation, submit a KYC modification request in the KRA system — ‘information on the death of investor received; confirmation awaited’.

After receiving a KYC modification request from the intermediary, the KRA will conduct an independent verification by the next working day of receipt of such a request.

After the validation of the death certificate, the KRA will be required to update the KYC record as ‘blocked permanently’ in the system and share information related to this updation with all linked intermediaries.

SEBI has asked stock exchanges, depositories, and regulatory bodies such as the Association of Mutual Funds in India (AMFI), Registrars Association of India (RAIN), along with stakeholders, including KRAs, to work on a common Standard Operating Procedures(SOPs). These SOPs will be made available on their websites along with that of the intermediaries.

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