SEBI Notifies Relaxation For Investors With Physical Shares
The Securities and Exchange Board of India (SEBI) has relaxed its norms for investors holding physical share certificates by extending the timeline for compliance with the Know Your Customer (KYC) norms from March 31 to September 30.
Under the new rules, all holders of physical securities in listed companies are required to provide their PAN, contact details, bank account details, and specimen signature for their corresponding folio numbers to their registrar and transfer agents. Failure to comply will result in RTAs freezing the folios after October 1, and such shares will be invalid for bonuses, dividends, and other corporate actions.
Shares or folios remaining frozen until December 31, 2025, will require RTAs and listed companies to refer to the authorities under either the Benami Transactions (Prohibitions) Act, 1988, or the Prevention of Money Laundering Act, 2002.
According to industry estimates, nearly 1-1.5 per cent of the shareholding in the securities market is still in the physical form, held through share certificates, with a total value of over Rs 3.5 trillion.
Ankit Garg, advocate, and founder of Garg Law Chambers, said that the investor community had been making representations about the burdensome multiple document submission process sought by companies and registrars, considering the varied interpretations of SEBI's old circulars.
Achint Arora, founder and director of WealthMax Consultancy Services, highlighted that investors often lose track of their investments and fail to designate a nominee for their shares, leaving legal heirs in the dark and shares unclaimed. He added that the KYC process for these investors is a bulky task since some of the shares were bought several decades ago in the 70s, 80s, and 90s, making it difficult for RTAs to gather the required information.
Since the mid-90s, all shares purchased in the securities market have been recorded electronically as demat accounts, eliminating the need for physical certificates. However, several investors still hold physical shares due to various reasons ranging from change of address, unawareness of holding, death of the original allottee shareholder, and investors migrating to other countries.
