In a landmark move to protect investor interests and minimise unclaimed assets in the Indian securities market, SEBI has introduced new guidelines leveraging DigiLocker. This initiative aims to prevent investments from becoming unclaimed due to heirs’ and nominees’ lack of awareness. With the increasing digitisation of financial services, this step aligns with the broader Digital India initiative.
Understanding Unclaimed Assets in the Securities Market
Unclaimed assets (UA) refer to investments, dividends, or accounts that remain inactive due to an investor’s demise or outdated contact details. An asset is classified as unclaimed when a dividend or interest payment fails or correspondence returns undelivered. However, many assets go unidentified as unclaimed because they remain in the deceased investor’s bank account without the knowledge of family members.
To mitigate this issue, SEBI has implemented various measures, including:
- Mandating investors to provide bank and contact details
- Requiring nomination or opting out from it explicitly
- Simplifying norms for transmission
- Establishing a centralised mechanism for reporting an investor’s demise
Role of DigiLocker in Managing Unclaimed Assets
DigiLocker, a government-backed digital document storage platform, is crucial to this initiative. It allows users to store and access important financial documents, including Aadhaar, PAN, driving licenses, and now, mutual fund (MF) and demat account statements. SEBI’s new circular states that AMCs and depositories must register with DigiLocker to allow investors to fetch their holding statements directly.
Key Features and Benefits of DigiLocker in the Indian Securities Market
1. Secure Storage and Access:
- Investors can fetch their MF holding statements, transaction statements, and Consolidated Account Statements (CAS) within DigiLocker.
- The system provides an option to fetch CAS automatically on January 1st every year.
2. Nomination Facility:
- Investors can add a nominee within DigiLocker, who will be notified upon their demise.
- The nominee can access stored financial statements after identity authentication.
3. Automated Demise Notification System:
- DigiLocker updates an investor’s status upon their demise through integration with the Registrar General and Census Commissioner’s death records or via KYC Registration Agencies (KRAs).
- This ensures the timely transmission of assets to rightful heirs, preventing assets from becoming unclaimed.
Process of Asset Transmission via DigiLocker
1. Investor Registers with DigiLocker:
- Investors link their MF and demat account details.
2. Nominee Specification:
- Investors specify their nominee’s contact details within DigiLocker.
3. Demise Notification:
- If the investor passes away, DigiLocker automatically notifies the nominee.
4. Access and Transmission:
- The nominee can log into DigiLocker, access holding statements, and initiate transmission of securities if they are also the nominee in the folio/account.
- If not, the nominee can inform the legal heirs or surviving joint holders for further processing.
Implementation and Compliance by AMCs and Depositories
SEBI has directed all AMCs, RTAs, and depositories to integrate with DigiLocker as issuers. This enables investors to:
- Fetch their holding and transaction statements directly.
- Get automatic updates on financial holdings.
- Securely store and transmit financial information to nominees.
Additionally, KRAs must electronically share verified demise details with DigiLocker to ensure data security.
Investor Advisory: Why You Should Use DigiLocker
SEBI advises all investors to register on DigiLocker and designate nominees. This can prevent their financial holdings from becoming unclaimed and ensure a smooth transmission process.
If you hold securities in physical form, consider dematerialising them to avail yourself of these benefits.
Final Thoughts
Integrating DigiLocker with the securities market is a significant step towards investor protection and financial transparency. By ensuring seamless access to investment details and facilitating asset transmission, SEBI aims to reduce unclaimed assets and empower investors.
Here is the link for the original SEBI circular: SEBI Circular.
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