Sebi to implement centralised verification mechanism for investor deaths

The Securities and Exchange Board of India (Sebi) announced that it would establish a centralised mechanism for reporting and verifying the death of an investor and smoothen the process of transmission in the securities market. 

Also, the regulator has put in place operational norms, including the obligations of regulated entities and registered intermediaries that have interfaces with investors or account holders who are natural persons. 

A circular issued on October 3 in this regard states that upon receipt of intimation about the demise of an investor from a joint account holder or nominees or legal representative or family member, the intermediary should obtain the death certificate along with the PAN from the notifier and carry out the verification of the death certificate in one working day after its receipt either online or offline.   

The intermediary shall treat the OSV (Original Seen and Verified) death certificate accompanied by the PAN of the deceased investor, received electronically along with the credentials of the notifier (including his/her PAN) and the validation report from an Investor Service Centre (ISC) of the Stock Exchange or Depository (MII), to be on par with its own OSV. 

If the concerned intermediary, after receiving information about the demise of the investor from the notifier or after inferring the same, does not have access to or is not in a position to obtain the death certificate, then it shall carry out the following steps, 

Intimate the investor, notifiers, or the nominee(s) that the KYC status of the investor has been flagged off as “On Hold” and require them to furnish the death certificate of the concerned investor. 

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Upon receiving the death certificate, the intermediary must update records in the KRA system. On the day it is verified, the intermediary must also submit a ‘KYC modification request’ to the KRA that “information on the death of investor received; death certificate verified”, and block all debit transactions in the account/folios of the deceased investor. 

For joint accounts, the specified mode of operation should be adhered to, and if the account is operated on either or survivor, anyone or survivor, etc. (i.e. modes other than joint mode), the account operation in such mode shall continue, as per the circular. 

In case the death certificate is not received, the concerned intermediary shall (by the next working day of the intimation). Submit a ‘KYC modification request’ in the KRA system, “information on death of investor received; confirmation awaited”. 

Thus, with the centralised mechanism in place, Sebi aims to increase transparency and foster an environment of trust in the securities market, ensuring bereaved families don't face unnecessary hardship or uncertainty after the loss of an investor.