SEBI Circular

Centralized Mechanism For Reporting The Demise Of An Investor Through Kras

SEBI decided to introduce a centralized tool for reporting and verification in case of an investor’s demise to smoothen the transmission process in the securities market. 

Obligation of Intermediary – verification of the death certificate

Onthe demise of an investor from “Notifier”, which includes joint account holder(s) or nominee(s) or legal representative or family member, then the ‘concerned intermediary’ shall obtain the death certificate along with the PAN from the notifier and Verify the death certificate and record self-certified copy of identity, relationship with deceased and contact details of the notifier.

Suppose the ‘concerned intermediary’ is not in a position to obtain the death certificate. In that case, he shall Inform the investor, notifier(s), or 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.

Obligation of intermediary – Updation of records in the KRA system by the Intermediary

After verification of the death certificate, the concerned intermediary shall Submit a ‘KYC modification request’ to the KRA that “information on the death of investor received; death certificate verified” and also upload the relevant documents and Block all debit transactions in the account/folios of the deceased investor.

If the death certificate is not received, then he shall Submit a ‘KYC modification request’ in the KRA system, “information on the death of investor received; confirmation awaited”.

Obligations of the KRA

Independently Validate and Verify

The KRA should validate and verify the modification request within the next working day, using its own system and cross-referencing with other reliable sources. It should also contact linked intermediaries for any updates related to the investor’s account.

Update KYC Record

Once the death certificate is validated, the KRA must update its system’s KYC record as “Blocked Permanently” and inform all linked intermediaries.

Handling Modification Requests

For KYC modification requests received as per paragraph 6, the KRA should mark the investor’s KYC status as “On Hold” and inform linked intermediaries.

Addressing Errors/Issues

If the KRA identifies errors or issues with the modification request, it should collaborate with the intermediary. Based on discussions, the KRA should update the KYC status as either “Modification Rejected or Cleared (Validated)” or “Blocked Permanently,” as appropriate, by the next working day.

Uniform Procedures

KRAs must establish consistent systems, protocols, and procedures to ensure uniform implementation of these guidelines across all KRAs.

Intimation on Transmission of assets of the deceased investor

Upon receipt of notification from KRA as “Blocked Permanently”, all intermediaries shall immediately block all debit transactions in the account and Intimate the notifier within 5 days about the procedure for transmission, providing the transmission request form and the list of documents required for the transmission. In case of joint account/s, the intermediary shall intimate the surviving joint account holder(s).

Transaction requests in accounts/folios are flagged off as “On Hold.”

When an intermediary receives a transaction request in an account/folio flagged as “On Hold” due to the investor’s death, the following steps must be taken:

Additional Due Diligence

The intermediary must conduct additional due diligence, which may include a video call with the investor or In-Person Verification (IPV) to confirm that the investor is alive.

Incorrect Demise Information

Suppose the intermediary establishes that the information about the investor’s demise is incorrect and can contact the investor. In that case, it should promptly submit a ‘KYC modification request’ in the KRA system, stating that the intimation of the investor’s death was false. Additionally, the intermediary should upload a report detailing the additional due diligence performed on the same day to avoid inconvenience to the investor.

KRA Reverts KYC Status

The KRA will, in turn, change the status of the KYC to ‘Clear or validated’ and communicate this update to all linked intermediaries, all on the same day.

Other obligations of Intermediaries

All intermediaries who have accounts or folios of investors whose status has been updated as deceased by the KRA shall submit the data w.r.t. intimation of transmission. In order to have uniformity for operationalizing this circular, Stock Exchanges, Depositories and industry associations like the Association of Mutual Funds in India (AMFI), Registrars Association of India (RAIN), etc., in consultation with stakeholders, including KRAs, may put in place common Standard Operating Record of such interaction shall be duly preserved by the intermediary for a period of seven years.

This circular shall come into effect from January 01, 2024, and was issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992.

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