Sebi for reducing unclaimed assets

New Delhi: Capital markets regulator Sebi on Friday proposed revamping the nominations framework in a bid to reduce unclaimed assets in the securities market as well as smoothen the process for claiming the assets by surviving successors of the deceased investors.

In its consultation paper, the regulator proposed revisions to nomination facilities for securities such as shares, bonds, units of REITs (Real Estate Investment Trusts), InvITs (Infrastructure Investment Trusts), AIFs (Alternative Investment Funds) and other securities held in dematerialized form and for units of mutual fund (MF) schemes that are expressed in a statement of account. This will address the objective of providing convenience to investors and uniformity in the procedures to institutions.

Such revamped nomination facilities will operate without affecting the prevalent systems of law governing transmission and succession -- rule of survivorship in case of joint holdings, when a person has died leaving a Will; and when a person has died without leaving a Will. The Securities and Exchange Board of India (Sebi) has sought comments till March 8 from the public. Sebi noted that the primary factors contributing to the increase in unclaimed assets are incomplete nominations or unavailability of nominations for financial assets in the securities markets. This led to impacts on the consequent transmission process of the deceased making transmission an ordeal for the family or successors of the deceased.

The regulator has suggested that nominations should be made, changed or cancelled in a safe, secure, verifiable manner by using digital signature or Aadhaar-based eSign or physical signatures of the investors or through dual authentication. If nomination is done by affixing a thumb impression, the same should be in presence of two independent witnesses. This serves to address non-repudiation risk and aid verifiability.

Further, nomination facilities will permit multiple nominees and be increased from current limit of only three to two-digit or three-digit (i.e 99 or 999), which are large and sufficiently high to address ordinary requirements of individual investors. Nomination facilities can be made, changed or cancelled at any time without any restrictions as to the number of times such facilities is utilized, Sebi suggested.