Sebi’s Plan to Reduce Unclaimed Assets

Sebi’s Plan to Reduce Unclaimed Assets: Capital markets regulator Sebi suggested on Friday to change the nominations framework. They want to do this to cut down on unclaimed assets in the securities market and make it easier for investors’ surviving family members to claim the assets.

Within its consultation paper, the regulator suggested changes to the ways that securities can be nominated. These changes would affect things like shares, bonds, units of REITs, InvITs, AIFs, and other securities that are held electronically, as well as units of mutual funds that are shown on a statement of account.

Sebi’s Plan to Reduce Unclaimed Assets

This will meet the goal of making things easier for clients and making sure that institutions follow the same steps every time.

The new nomination methods won’t change the current ways that law handles transmission and succession, such as the rule of survivorship for joint holdings, when someone dies leaving a Will, or when someone dies without leaving a Will.

People have until March 8 to give their thoughts to the Securities and Exchange Board of India (Sebi).

Sebi said that partial nominations or the lack of nominations for financial assets in the securities markets are the main reasons why the number of unclaimed assets is rising.

In turn, this affected the process of transmission after the death, making it hard for the family or successors of the dead.

The government agency said that nominations should be made, changed, or canceled in a safe, secure, and verified way. This could be done with an investor’s physical signature, a digital signature or an eSign based on Aadhaar, or through dual authentication.

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If a thumb print is used to nominate someone, it should be done in front of two separate witnesses. To deal with the risk of not being able to be proven wrong, this is done.

Also, nomination facilities will let more than one person be nominated, and the current limit of three names will be raised to two or three digits, such as 99 or 999. These numbers are big enough to meet the needs of most individual investors.

Sebi said that nomination facilities can be made, changed, or canceled at any time, and there are no limits on how many times they can be used.

If there are joint holdings and the rule of survivorship applies, the remaining joint holders shouldn’t have to sign any KYC paperwork or make any promises.

In the event that there are no names, the legal heirs should have to show proof and follow the steps outlined by the law in order for the will to be transferred to them.

To make the plans work, depositories, asset management companies that run mutual funds, and the registrars for those funds should update their nomination systems.

The government said that these organizations should offer e-nomination services, such as an authentication digital signature certificate, an Aadhaar-based e-sign, and two-factor authentication.

Since this kind of authentication is used for transactions, it should also be used for e-nomination.

In MF, joint accounts can’t do online transactions. In order to allow e-nomination, online transactions should also be allowed in joint accounts, just like they are in bank accounts.

Also, for the time allowed, these institutions should keep accurate records of all proposals that are made, changed, or canceled.

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