SEBI Says No Freezing of Investment Folios without PAN, KYC and Nomination
Moneylife Digital Team 24 November 2023
The Securities and Exchange Board of India (SEBI) decided to do away with its earlier order that provided for the freezing of folios of holders of physical securities without permanent account number (PAN), know-your-customer (KYC) details and nomination, with immediate effect. In March, SEBI made it mandatory for all demat account-holders to either furnish nomination declarations or opt out of nominations by 30 September 2023. As Moneylife had pointed out, joint holders of mutual funds (MFs) and those with very old investments struggled to meet SEBI requirements. 
In a circular, SEBI says the reference to the term 'freezing or frozen' has been deleted. "Based on representations received from the Registrars' Association of India, feedback from investors, and to mitigate unintended challenges on account of freezing of folios and referring frozen folios to the administering authority under the Benami Transactions (Prohibitions) Act (BTPA) and Prevention of Money Laundering Act (PMLA), it has been decided to do away with the above provisions," the market regulator says.
Under the earlier rule, all holders of physical securities in listed companies needed to furnish PAN, nomination, contact details, bank account details and specimen signature for their corresponding folio numbers. The folios where any one of such documents is not available on or after 1 October 2023 were required to be frozen by the registrars to an issue and share transfer agents (RTA), SEBI had said in May.
Further, frozen folios were required to be referred by the RTA or listed company to the administering authority under the BTPA and PMLA if they continue to remain frozen as of 31 December 2023.
On nomination, Moneylife has been pointing out that the reality of each household and its internal relationships are vastly different and it is not always prudent or safe to identify and declare nominees in advance. "Over the years, Moneylife Foundation has come across real-life cases when beneficiaries of a Will, when informed about the contents, erupt in anger against their parents because of perceived injustice between siblings. If MF investors do not follow this nomination process or provide a declaration opting out of nomination, they will have their assets frozen. No democratic country can freeze the hard-earned, tax-paid assets of its citizens, but Indian regulators allow this with impunity." (Read: Succession Issues: Will PMO Force Financial Regulators To Ensure Ease of Claiming Assets)
Last year in April, the market regulator revised the then-existing threshold limit for simplified documents to Rs5 lakh from Rs2 lakh currently for securities held in physical mode per listed issuer. Also, the threshold in this regard for securities held in the dematerialised mode for each beneficiary account has been increased to Rs15 lakh from Rs 5 lakh. (Read: SEBI Amends Rules To Ease Securities Transmission Procedure)
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3 months ago
truly said .It was a stupid gesture on the part of sebi without understanding how much discomfort it will cause and instead of helping customers they are trying to put spokes .They need to do a lot in regulating what is happening in stock market frauds
3 months ago
Kabhi Haan, Kabhi Naa ! Confused SEBI. Speaks volumes about the incompetence and lack of spine of a Regulator who buckles under pressure from various lobbies.
3 months ago
This is better than straight forward freezing the same.
3 months ago
most welcome impact of the conscious representation by all alert citizens
also immediate response from authorities !!!
--r s Kulkarni
3 months ago
Good Practical decision by SEBI
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