Big improvements in India’s market infrastructure and rapid technological adoption have made it very easy for new investors to access and transact in financial markets. But the process for transmission of those assets in case of the investor’s demise, remain archaic and paper-bound. The lack of a single-point, standardised process for submission and verification of death claims even when nominations are in place was brought home painfully to many families during Covid. The Securities and Exchange Board of India (SEBI) has become the first financial market regulator to acknowledge this problem and usher in a centralised and time-bound mechanism for the transmission of assets, with a circular last week.

From January 1, 2024, SEBI plans to usher in a simplified process for filing of death claims on listed shares, infrastructure and real estate investment trusts, mutual funds, portfolio management schemes and alternative investment funds. In the event of an investor’s demise, a family member, joint account holder, nominee or legal representative can notify any market intermediary of the event, by filing the death certificate with the investor’s PAN and his own contact details. The intermediary must validate the death certificate within one working day and submit a request with a KYC registration agency (KRA) for blocking all debit transactions in the deceased investor’s accounts. The KRA is required to notify all intermediaries under SEBI’s jurisdiction about this change. Thereafter, all firms who hold any of the investor’s financial assets in custody, are expected to reach out to the notifier within five days, informing him/her of the process to file a claim. This clearly laid-down process is likely to make life easier for claimants in many ways.

For one, the notifier can file just one claim with a single market intermediary to set the ball rolling on transmission of the deceased’s assets to the respective nominee, across multiple financial entities. Today, if an investor holding say 12 different mutual funds and shares with the two depositories passes away, the successor has to write to 14 different entities and fulfil varying documentation requirements, to ensure transmission. Two, the investor’s family gets notified of all the assets linked to his/her PAN/KYC, even if they weren’t aware of these holdings. Three, the stringent timelines for intermediaries to complete verification should hopefully do away with interminable delays.

To further help investors, SEBI should have specified a standard set of documents across entities to establish death and succession. While SEBI has taken the first step, the new rules on transmission would be much more effective if other regulators overseeing financial assets — RBI, PFRDA, IRDA, India Post and the Corporate Affairs Ministry (which runs Investor Education and Protection Fund) — also come up with a centralised transmission process. This idea should not get stalled like the centralised KYC across financial assets mooted long ago.