KYC Updation in Share Folios

KYC Updation in Share Folios

Still holding shares in physical form? The Securities and Exchange Board of India (“SEBI” or “Board”) has been committed to introduce a streamlined procedure to update the basic identification and bank details associated with shares held in physical mode and to dematerialize them for further dealing. Recently, in March 2023, SEBI has introduced an elaborated procedure to undertake the process of updating ‘Know Your Customer’ (“KYC”) details in the share folios which do not have such details updated. Not only this, for strengthening the transparency and safety in the securities market, updating basic KYC details associated with the folio numbers of the holders of shares has now been made mandatory by the Board in order to prevent share duplication or investor impersonation. Investors can now undertake share dematerialization and KYC updation of their folios by raising Investor Service Requests (“ISR”) with the Registrar and Transfer Agents (“RTAs”) of the respective companies.

There are certain share folios in physical mode in which the bank details of the investor are not updated due to which such investors are unable to receive and enjoy all the benefits related to such share investments. The shareholdings of such investors have been transferred to the Investor Education and Protection Fund (“IEPF”) due to lack of communication with such investors for more than seven years because of the unavailability of their basic KYC details.

In March 2023, SEBI rolled out a notification which enumerates the procedure to update the following 5 (five) mandatory KYC details associated with folio numbers of the shares held by investors:

  1. Aadhar Number
  2. Permanent Account Number
  3. Mobile Number
  4. E-mail Id
  5. Bank Details and Specimen signature of the holder

The investors must ensure that the above-mentioned KYC details must be updated in all the folios held by them in physical or in demat form. The folios in which the above-mentioned details will not be updated by 1st October 2023 shall be decalred as ‘frozen’ by the concerned RTA.

From 1st April 2024, any payment for dividend, interest or redemption payment for all the folios will be received only through online mode. The shareholders are advised to update their KYC details in the records of RTA at the earliest to prevent freezing of the folios held by them.

In case the folios continue to remain frozen as on 31st December, 2025, then they 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.

A clear and detailed process has been devised by the Board to prevent any loopholes or ambiguities that existed in the earlier notifications rolled out in 2021, in this regard. The investors who want to update the names of the nominees, or opt out of the nomination, can also raise a request with the RTA pursuant to this notification rolled out by SEBI.

The investors may proceed to undertake KYC updation for materializing the accumulated earnings (both principal and dividend earnings) in their past share investments and prevent their share folios from getting the status of frozen share folios by the RTA. The underlying procedure introduced by SEBI for KYC updation will help the investors revive their long-lost investments and the benefits attached thereto, which were not being enjoyed by them for a very long time.