What Sebi's new framework for securities transfer means for heirs

The Securities and Exchange Board of India (Sebi) has approved a simpler and standardised framework to help legal heirs and claimants transmit securities faster after an investor’s death. The change matters because families often struggle to access securities when they do not know where investments are held, lack documents, or face different requirements from intermediaries.

 

Why heirs struggle

 

Legal heirs have long found transmission of securities cumbersome. “Families often discover investments only after the investor’s death,” says Abhishek Paliwal, partner, King Stubb & Kasiva, Advocates and Attorneys.

 

This problem becomes worse when the investor has not maintained proper records or has left old physical share certificates.

 

The cost and effort can become disproportionate for small holdings. Families may even abandon claims when the legal cost of probate or succession certificates exceeds the value of the securities. Larger portfolios, on the other hand, may still require extensive documentation.

 

Families may also have to deal with several intermediaries, including depositories, registrars, brokers and issuers. Different requirements across intermediaries can create uncertainty and delay. The absence of a centralised mechanism to identify the deceased investor’s full securities portfolio can also delay claims.

 

Succession-related issues can add to the difficulty. Legal heirs often need multiple documents. Coordinating several heirs can be difficult. Disputes among them can delay transmission or leave requests unresolved. Nominees can also face disputes over the rights of legal heirs.

 

The absence of a nomination can make the process expensive and time-consuming. If an investor dies without a Will or nomination, heirs need to complete succession-related formalities. Inadequately documented family arrangements can also complicate the process. Overseas families face additional hurdles in the verification and acceptance of foreign documents.

 

How Sebi’s framework helps

 

Sebi’s reforms mark a shift towards a more facilitative and investor-centric approach. The quick transmission route recognises that low-value claims should not face the same scrutiny as larger claims. This fast-track route should reduce the time and effort required to access smaller holdings.

 

“The quick route matters because many dormant or forgotten investments fall within lower value ranges,” says ,” Sonam Chandwani, managing partner, KS Legal & Associates. 

 

The earlier simplified-documentation limits had become unrealistic because retail participation and stock values had grown. The new thresholds are modest, but the principle behind the change is important.

 

The doubling of limits for simplified documentation expands the number of families that can benefit from reduced paperwork. This is a meaningful change, not a cosmetic revision.

 

The relaxation on probate can also reduce delays and costs. It helps where there is no dispute over the genuineness of the Will. This change may have the most meaningful impact on timelines. Its effectiveness, however, will depend on how efficiently intermediaries operationalise it.

 

The framework also allows a combined affidavit-cum-no-objection certificate (NOC). This can reduce repetitive documentation, lower execution costs, and reduce the scope for technical objections. The change may appear minor, but it can provide useful relief at the ground level.

 

The acceptance of quick response (QR) code-enabled death certificates recognises the increased digitisation of public records. QR-code death certificates should improve verification and reduce avoidable procedural objections. Digital verification improves convenience without compromising authenticity.

 

The eased verification of foreign death certificates will help non-resident Indians (NRIs) and globally mobile families. Greater flexibility in verifying foreign documents should reduce administrative friction for overseas claimants. It can also reduce the expense and delay linked to apostilles and consular certifications.

 

Overall, the reforms significantly reduce procedural hurdles. They represent a meaningful improvement in the transmission process.

 

Gaps remain

 

The new framework cannot solve every problem. Simplification cannot resolve competing claims among heirs. Succession and entitlement disputes may still require resolution outside the regulatory process.

 

Nominees may continue to face disputes over the rights of legal heirs. Family disputes can still delay transmission. Objections or competing claims among family members may leave requests unresolved.

 

Contested Wills will still require judicial intervention. Allegations of undue influence will also need judicial intervention. If an investor dies intestate, or without a Will or nomination, heirs may still need legal heir certificates or succession certificates. These can be time-consuming, litigious and costly.

 

Implementation will also matter. The success of the reforms depends heavily on intermediaries. Differences in interpretation across market participants can still create inconsistent documentation practices. Some intermediaries may continue to demand additional documents out of fear of future liability.

 

Fragmented investments can also trouble families. Securities spread across dematerialised (demat) accounts, trading accounts, mutual funds and bonds can make asset identification difficult. The absence of a centralised way to identify the investor’s full securities portfolio may continue to cause delays.

 

“Old physical share certificates can still create hardship,” says KC Jacob, partner, Economic Laws Practice.

 

A lack of investor awareness about nominations, estate planning and updated records also remains a gap. Families may continue to face problems where investors have not maintained proper records.

 

The simplified-documentation thresholds may need periodic revision. Larger portfolios will still require extensive documentation and compliance. They may continue to involve delays and compliance burdens despite the reforms.

 

What investors should do

 

Investors should not rely on regulatory simplification alone. They should maintain an updated record of all their investments. This record should include demat accounts, trading accounts, mutual funds, insurance policies, bonds, folio numbers and intermediaries.

 

They should register nominations across all securities and investment products. They should review nominations periodically and update them after major life events. They should also keep know-your-customer (KYC) details and contact information updated with all intermediaries.

 

Investors should organise estate planning through a Will. A properly drafted Will should specify the distribution of securities and other financial assets. Investors who hold physical share certificates should get them registered in their demat account.

 

They should also keep trusted family members informed about the existence and location of financial records. This can reduce the burden on family members after the investor’s death.

 

What heirs should do

 

Nominees and heirs should first identify all investments of the deceased investor. Awareness of the deceased investor’s assets is essential to prevent securities from remaining unclaimed.

 

Claimants should inform the relevant intermediaries at the earliest. Nominees should verify whether a valid nomination exists. Nominees and heirs should approach the concerned depository participant or registrar with complete documentation.

 

They should keep the death certificate, identity documents, proof of relationship and other prescribed documents ready. They should preserve all records and maintain copies of applications, submitted documents and acknowledgements received.

 

“A claimant who receives securities in demat form should have an active demat account,” says Amit Kumar Nag, partner, AQUILAW.

 

Multiple heirs should provide consistent documentation and try to resolve differences amicably. Disputes and objections can significantly prolong the transmission process. Nominees and heirs should seek legal assistance where succession issues arise.

 

Key changes introduced by Sebi 

•    Quick Transmission Processing (QTP) route for small claims has limits: ₹10,000 for physical shares, ₹30,000 for demat

•    Simplified-documentation limits doubled: ₹10 lakh for physical, ₹30 lakh for demat

•    PAN submission requirement removed

•    Probate of Will no longer mandatory

•    Combined affidavit-cum-NOC allowed

•    QR-code death certificates accepted

•    Foreign death certificate verification eased via bank routes