Centralized mechanism for reporting the demise of an investor through KRAs

SEBI vide circular dated October 03, 2023 has established a Centralized mechanism for reporting the demise of an investor through KRAs:

Entralized Reporting and Verification

The centralized mechanism for reporting investor demise is a significant development in the Indian securities market. It primarily targets investors who hold securities in physical form and have a PAN (Permanent Account Number). Listed companies that wish to provide access to this mechanism for their investors can establish connectivity with the Know Your Customer Registration Agencies (KRA) through their Registrar and Transfer Agents (RTAs).

Obligations of Regulated Entities

Under this mechanism, regulated entities, including registered intermediaries, play a pivotal role in the process. When they receive intimation of an investor’s demise from a notifier (joint account holder, nominee, legal representative, or family member), they must follow a series of steps.

First, they must verify the death certificate, which can be done online through the government authority’s website or offline through an Original Seen and Verified (OSV) process. This verification should be completed within the next working day of receiving the certificate.

Simultaneously, intermediaries must maintain a self-certified copy of the notifier’s proof of identity, relationship with the deceased, and contact details. If an intermediary cannot obtain the death certificate, it must inform the investor or notifier and flag the investor’s KYC status as “On Hold.”

KRA’s Role

The KRAs, responsible for maintaining the KYC records, play a crucial role in this mechanism. Upon receiving a KYC modification request from intermediaries, they independently validate and verify the death certificate, coordinating with other linked intermediaries if necessary. If the death certificate is verified, the KYC record is updated as “Blocked Permanently.” If errors or issues arise, KRAs consult with the intermediary to resolve them.

Transmission of Assets and Transaction Requests

Once the KRA flags an investor’s KYC as “Blocked Permanently,” all intermediaries must immediately block debit transactions in the investor’s account and notify the notifier or nominee about the transmission procedure. In case of transaction requests in accounts flagged as “On Hold,” additional due diligence, such as video calls or in-person verification, is required.

Ensuring Accuracy

To avoid inconvenience, if information about an investor’s demise is proven incorrect, the intermediary must promptly inform the KRA and submit a KYC modification request. The KRA will then update the KYC status to “Clear or Validated.”