Sebi relief for investors holding physical shares
March 24, 2023
About 1-1.5% of shareholding in the securities market is still in the physical form, held through share certificates.
Investors holding physical share certificates have got a reprieve, with the Securities and Exchange Board of India extending the timeline for complying with know your customer (KYC) norms from March 31 to September 30.
It is now mandatory for all holders of physical securities in listed companies to furnish PAN, nomination, contact details, bank account details and specimen signature for their corresponding folio numbers to their registrar and transfer agents.
Any failure in doing so will result in folios being frozen by RTAs after October 1. Such shares will not be eligible for bonus, dividends and other corporate actions.
If shares or folios continue to remain frozen till December 31, 2025, RTAs and listed companies will have to refer such folios to the authority under the Benami Transactions (Prohibitions) Act, 1988, and/or Prevention of Money Laundering Act, 2002.
About 1-1.5% of shareholding in the securities market is still in the physical form, held through share certificates. This translates to a value of over Rs 3.5 trillion, according to industry estimates.
“Representations were being made by the investor community about the difficulties being faced in providing multiple documents as sought by companies and registrars according to varied interpretations of the earlier Sebi circulars,” said Ankit Garg, advocate and founder of Garg Law Chambers.
According to Achint Arora, founder and director of WealthMax Consultancy Services, many investors lose track of their investments made decades ago, and fail to designate a nominee for their shares, leaving legal heirs in the dark and shares unclaimed. “Doing KYC for these investors is a cumbersome process. Some of the shares were bought in the 70s, 80s and 90s, and digging up the information at the RTA’s end is not easy,” he said.
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Since mid-90s, all shares purchased in the securities market are stored electronically in a demat account, eliminating the need for physical certificates.
Several investors still hold physical shares due to reasons ranging from change in address, lack of awareness of their holding, death of the original allottee shareholder and investors leaving the country.
[The Financial Express]