SEBI Proposes Simpler Rules for Transmission of Securities After Investor’s Death

India’s markets regulator, the Securities and Exchange Board of India (SEBI), has proposed a set of measures to simplify the transmission of securities after the death of an investor. The proposal aims to reduce paperwork, revise outdated thresholds, and speed up claim settlements so that nominees and legal heirs can more easily access financial assets.

Simplifying the Transmission Process

In a consultation paper released on Thursday, SEBI suggested streamlining the documentation required for transferring securities following an investor’s death. The regulator noted that the existing limits for simplified documentation were set years ago and may no longer reflect the rapid expansion of the securities market and the significant rise in asset prices.

To address this, SEBI has proposed revising the thresholds for simplified documentation, enabling more claimants to benefit from easier procedures. The overall objective is to ensure quicker restitution of assets to the families of deceased investors while reducing the compliance burden on intermediaries.

New STP Mechanism and Revised Thresholds

As part of the reforms, SEBI has proposed introducing a straight-through processing (STP) mechanism for very small claims, where the cost of documentation could exceed the value of the securities involved. Under the proposal, the STP limit will be ₹10,000 for physical securities and ₹30,000 for dematerialised (demat) securities.

The regulator has also recommended raising the threshold for simplified documentation to ₹10 lakh for physical holdings and ₹30 lakh for demat holdings. Additionally, listed companies may choose to further increase the ₹10 lakh limit for physical securities at their discretion.

These measures are expected to significantly reduce paperwork and enable faster claim settlements.

Documentation Requirements for Nominees

Where a nomination exists, the transmission process will remain relatively straightforward. Nominees will need to submit a transmission request form, the latest client master list (CML) of the demat account attested by the depository participant, a verifiable death certificate, and valid identity proof.

A verifiable death certificate may include the original document, a copy verified with the original by the nominee, a copy attested by a notary public or gazetted officer, or a certificate containing a QR code. In cases requiring a legal heirship certificate, it must be issued by a revenue authority not below the rank of a Tehsildar.

According to SEBI, once intermediaries settle the claim, nominees can transfer the securities to the legal heirs without attracting income tax.

Process When No Nomination or Will Exists

In situations where neither a nomination nor a will exists, the process becomes more complex because intermediaries must ensure that securities are transferred to the rightful heirs. To address this, SEBI has proposed a risk-based framework with different documentation requirements depending on the value of the claim.

For low-value claims processed through the STP mechanism, claimants will only need to submit a transmission request form, the latest CML, a verifiable death certificate, valid identity proof, and an undertaking.

For claims above the STP threshold but within the revised simplified documentation limit, additional documents such as a notarised indemnity bond and a no-objection certificate (NOC) from other legal heirs, or a family settlement deed, will be required.

For claims exceeding the revised thresholds, stronger legal documentation will be necessary. Claimants will need to provide the transmission request form, CML, death certificate, ID proof, and a notarised affidavit from all legal heirs confirming ownership of the securities. They must also submit either a succession certificate, a letter of administration or court decree; a copy of the will along with a notarised indemnity bond; or a legal heirship certificate supported by an indemnity bond and NOCs from other heirs.

Standardising Claim Procedures and Timelines

SEBI has also proposed standardising the claim submission process. Entities will be required to provide standard forms, make them available both physically and online, acknowledge receipt of claims, and promptly inform claimants about any missing documents. They may also offer an online facility for submitting and tracking claims.

Transmission requests should be processed within 21 calendar days after all required documents are received. If a claim is delayed or rejected, the claimant must be informed along with the reasons.

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Additional Provisions for Overseas Cases

For cases involving the death of an investor outside India, SEBI has proposed additional modes of certifying proof-of-death documents. Apart from certification by a court magistrate, judge, notary public, Indian embassy or consulate, or through apostille, certification by authorised officials of overseas branches of Indian scheduled commercial banks or foreign banks will also be accepted. SEBI has invited public comments on the proposed framework until April 2.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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