SEBI Set Aside the Norms w.r.t Freezing of Folios Without PAN, KYC Details and Nomination

Circular: SEBI/HO/MIRSD/POD-1/P/CIR/2023/181 dated 17-11-2023

Capital markets regulator SEBI on 17/11/2023 issued a circular whereby it is decided to do away with the provision of requiring the freezing of folios without PAN, KYC details and nomination for all holders of physical securities.

Earlier, the SEBI issued a Master Circular [SEBI/HO/MIRSD/POD-1/P/CIR/2023/70] for Registrars to an Issue and Share Transfer Agents dated May 17, 2023. Under the extant norms common and Simplified Norms for processing investor’s service requests by RTAs and norms for furnishing PAN, KYC details and Nomination were also specified.

As per the said circular, all holders of physical securities in listed companies needed to furnish PAN, Nomination, Contact details, Bank A/c details and Specimen signature for their corresponding folio numbers.

In case the holder of physical securities fails to furnish the aforesaid details by October 01, 2023. The folio of those security holders shall be frozen by RTA. Further, the Frozen folios shall be referred by the RTA/listed company to the administering authority under the Benami Transactions (Prohibitions) Act, 1988 and/or Prevention of Money Laundering Act, 2002, if they continue to remain frozen as on December 31, 2025.

The SEBI vide current circular dated 17/11/2023 decided to do away with the provision of requiring the freezing of folios and refereeing the same to the company to the administering authority under the Benami Transactions (Prohibitions) Act, 1988 and/or Prevention of Money Laundering Act, 2002.

The action is taken on the basis of representations received from the Registrars’ Association of India, feedback from investors, and to mitigate unintended challenges on account of freezing of folios and referring frozen folios to the administering authority under the Benami Transactions (Prohibitions) Act, 1988 and/or Prevention of Money Laundering Act, 2002.

This move, aimed at simplifying the rule and will come into force with immediate effect.

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