SEBI Clarifies Rules for RTAs Handling Investor Service Requests

In terms of nominations by holders of physical securities, Sebi stated that nomination forms will be sent out in two waves to the security holder accounts. The capital markets regulator, the Securities and Exchange Board of India (Sebi), today clarified requirements for Registrars to Issue and Share Transfer Agents (RTAs) in processing investor service requests, as well as norms for providing PAN, KYC data, and nomination. Read on to learn more about the new SME IPO 2021 laws that have simplified the lives of investors.

This comes after the Registrars Association of India filed a complaint with the Sebi.

The RTAs shall not handle any service requests or complaints received from the holder(s) / claimant(s) until PAN, KYC, and nomination documents/details are received,” Sebi stated in a circular.

In terms of nominations by holders of physical securities, Sebi stated that nomination forms will be sent out in two waves to the security holder accounts.

From January 1 onwards, a form like this will be accessible for single account customers, and from April 1 onwards, for joint account holders.

The RTA will make a soft copy of the form available on its website.

Sebi added that if there is a slight disparity between the securities holder’s signature in the RTA’s folio and the current signature, the service request would be processed after the 15-day notice period.

If the RTA’s letter is returned as undeliverable, the investor will be advised to acquire signature verification from the lender in order to execute the request.

In the event of an objection, the RTA would urge the investor to provide signature verification by the lender along with any of the papers listed above, including Aadhaar, a valid passport, a valid driving license, and a valid PAN card.

If there is a major mismatch in signatures or if the signature card is not available, the holder or claimant must provide an original canceled check with the security holder’s name printed on it, a bank passbook or bank statement attested by the bank, and a banker’s attestation of the signature, according to Sebi.

Sebi stated that in the event of a name mismatch, the driving license in smart card form or a duplicate of the digital version will be acceptable.

“Copies of papers presented in hard copy that are self-attested by the holder will be handled by the RTA for all service requests, except transmission (s). Affidavits or attestation/notarization of papers are not required by RTA “Sebi said.

The RTA will update the holder’s folios with information on current address, bank details, e-mail ID, and mobile number from the details available in the Client Master List (CML) provided the holder or claimant supplies the CML, according to the regulator.

Furthermore, details that are already on file with the RTA will be overwritten if the investor makes a special request.

Only those details from the demat account that are not accessible for the physical folio in the RTA database will be updated in the regular routine.

Sebi further stated that securities in frozen folios will only be eligible for electronic payments, including dividends, interest, and redemption payments.

Listed firms must guarantee that notice is conveyed to the holder that payment is due, and that payment is done electronically if certain conditions are met.

Within 90 days after January 1, RTAs must obtain a certificate of conformity from a practicing company secretary validating the adjustments made and processes put in place to comply with the framework. Previously, the deadline was 45 days.

In a circular dated December 14, 2021, the Securities and Exchange Board of India (SEBI) highlighted the uniform and simplified standards for RTAs to execute investor service requests, as well as the norms for providing PAN, KYC data, and Nomination.

The RTA will handle copies of papers submitted in hard form if the holder self-attests them for all service requests other than transmission, it is noted (s).

RTA does not need affidavits or attestation/notarization of documents.

RTA maintains KYC details for all of the holder’s folios- o If the holder/claimant supplies the Client Master List (CML), RTA will update the holder’s folio(s) with information on current address, bank details, E-mail id, and mobile number from the CML.

• Information already on file with the RTA shall be rewritten in response to a specific request from the investor, as indicated in the Form ISR-1 authorization clause.
• Normally, only the Demat account details that are not accessible for the physical folio in the RTA database will be updated.

The holder/claimant may approach any of the empanelled e-Sign Service Providers, the details of which are listed on the Controller of Certifying Authorities (CCA), Ministry of Communications and Information Technology’s website, to get an e-sign.

If physical security holders are needed to present their PAN, KYC information, and nomination:

• The holder must provide suitable folio numbers, as well as a mobile phone number and an email address, for data validation.
• RTAs will not process any service requests or complaints received from the holder(s)/ claimant until PAN, KYC, and Nomination documents/details are acquired (s).
• All payments must be made online, including dividends, interest, and redemption. The Listed Company shall make certain that the holder is informed of the payment needed and that it is paid electronically.

Before 90 days after the Circular’s effective date, RTAs must get a certificate of conformity from a practicing Company Secretary, attesting to the alterations made, mechanisms put in place, new operating processes formed, and so on, in complete accordance with the Circular’s regulations.

Norms for dealing with investors’ service requests for physical security holders

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The following regulations will apply as a continuous step to improve the convenience of conducting business for investors in the securities market, according to the SEBI Circular of November 03, 2021:

For fulfilling investor service requests, Registrars and Transfer Agents must adhere to standardized and simplified criteria, which include the submission of PAN, KYC, and nomination information (RTAs)

An electronic interface is used to conduct investor inquiries, complaints, and service requests.

Holders of tangible securities are required to furnish their PAN, KYC information, and nomination information.

Frozen folios that lack a valid PAN, KYC data, or nomination

PAN and Aadhaar must be linked for all holders of physical securities.

To unify and simplify the RTAs’ handling of investor service requests, SEBI has established the following forms:

A) A request for financial services.

Use the form ISR-1 to seek the registration of a PAN, KYC details, or changes/updates to those details for securities held in physical mode.

B) Changes to the signature of the securities holder

C) To change the securities holder’s signature, the holder / claimant must supply an authentic canceled check and a banker’s confirmation of the signature as per Form ISR-2.

All holders of physical securities must disclose their PAN, KYC, and nomination details to the RTA. Details about the nomination must be supplied in either paper or electronic format.

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Investor service queries handled by RTAs:

A) A request for financial services.

Use the form ISR-1 to seek the registration of a PAN, KYC details, or changes/updates to those details for securities held in physical mode.

B) Changes to the signature of the securities holder

To change the securities holder’s signature, the holder / claimant must supply an authentic canceled check and a banker’s confirmation of the signature as per Form ISR-2.

(C) All holders of physical securities must furnish the RTA with their PAN, KYC, and nomination data. Details about the nomination must be supplied in either paper or electronic format.

It should be emphasized that all holders and claimants of physical securities must present a PAN, and RTAs must check PAN data using the Income Tax Department’s capability (ITD). In this context, the ITD has designated SEBI registered RTAs as suitable institutions for validating PANs using its ‘Online PAN Bulk Verification’ (PBV) tool.

Bulk PAN Verification

Certain entities have access to an online PAN verification service. PAN verification can also be done on behalf of another person provided they have all of the necessary information.

There are three options for completing the PAN Verification online.

Option 1: A single PAN is verified at a time.

Option 2: Verification of PANs in bulk (External Agencies)

Option 3: ‘User Paying Model’-based bulk PAN verification.

Bulk PAN verification (External Agencies)

External agencies, which can include both government and non-government organizations, can register as PAN verification agencies and verify as many PAN card data as they like. DGFT, CBEC, FIU, Banks, UTIISL, NSDL, and MCA are examples of agencies that come within this category. The procedure of bulk PAN verification may be found on the Income Tax India E-Filing website, which is a government website.

Process to verify PAN in bulk

For Bulk PAN Verification, agencies must register.

After completing the registration process, proceed to the ‘Bulk PAN Query Page’ and select the ‘upload Query’ option.

To upload the query, use the XML format and then click “Submit.”

The token number is produced once the query is successfully submitted.

This token number is needed to examine the information of PANs that have been submitted through this system.

Process of bulk PAN verification user registration

Go to the Indian Government’s Tax E-filing website and click ‘Register Yourself’ on the homepage.

To choose a user type, click the ‘Bulk PAN Verification User’ button.

Provide the agency’s PAN/TAN card data, password details, the PAN of the person who will function as the organization’s communication details, the primary contact, and the digital signature certificate, if applicable.

Then press the ‘Submit’ button.

Aside from that, anybody doing mass PAN verification must submit an authorization letter signed by the agency’s leader. Following that, the PAN request will be evaluated, and permission will be granted upon receipt of all papers.

Following the review, an email with the activation link and User ID credentials will be sent to the registered email address, assisting with the activation of an e-filing account.

The user may now complete the procedure by logging in using a new User ID and the password they created.

Bulk PAN verification theme on User Paying Model

Only recognised government and non-government entities can utilize the User Pays Model for bulk PAN verification. It is a PAN verification procedure that is software-based. The cost of registering to use this feature for bulk verification is Rs 12000, plus 18 percent GST. The renewal fees are the same as the original registration fees.

The nicest aspect about employing this service is that each day, the agency receives a certain amount of free PAN verifications. In the event that the verification request exceeds the limit, the user must pay separately for using the account created for the service provider.

If an agency uses the API-based, file-based, or screen-based PAN verification service, it must have a sufficient deposit against its User ID in order to validate PAN numbers.

Sebi requires demat shares to conduct investor service requests.

The Securities and Exchange Commission (Sebi) has also established operational standards for dematerialization of securities when processing investor service requests.

Sebi said on Tuesday that listed businesses will only issue securities in dematerialized form when processing service requests from investors, with the goal of improving convenience of dealing in securities markets.

In addition, the regulator has established operational standards for the dematerialization of securities in the course of fulfilling investor service requests.

According to a circular issued by the Shares and Exchange Board of India (Sebi), listed businesses will henceforth issue securities in dematerialized form only when completing specific service requests, as part of an ongoing effort to make it easier for investors to trade in securities markets.

Issue of duplicate securities certificates, claim from unclaimed suspense account, renewal/exchange of securities certificates, endorsement, splitting of securities certificates, consolidation of securities certificates or folios, transmission and transposition are examples of investor demands.

Securities holders/claimants will be required to submit a form in the format defined by the regulator, together with supporting documentation, to be hosted on the websites of issuer businesses and RTAs (Registrars to an issue and share Transfer Agents).

After eliminating any objections, the RTA/issuer businesses must verify and process the service requests, and then issue a ‘Letter of Confirmation’ in place of actual securities certificate(s) to the securities holder or claimant within 30 days of receiving the request.

The ‘Letter of Confirmation’ will be effective for 120 days from the date of its issue, during which time the securities holder/claimant must seek dematerialization of the securities from the depository participant.

In the event that no demat request has been received by the RTA/issuer company after 45 days and 90 days from the date of issuance of the Letter of Confirmation, the RTA/issuer company will have to send a reminder to the securities holder/claimant.

If a securities holder/claimant fails to make a demat request within this time frame, the RTA/issuer business will be required to credit the securities to the company’s suspense escrow demat account.

Applications for effecting securities transfers will not be approved unless the securities are kept in dematerialized form with a depository, according to a Sebi notification issued on Monday.

The regulator said, “Transmission or transposition of securities held in physical or dematerialized form shall be conducted solely in dematerialized form.”

The change will make transactions easier, more convenient, and safer for investors. Sebi has updated the Listing of Obligations and Disclosure Requirements (LODR) Regulations to reflect this change.

Summary

The Securities Exchange Board of India released Clarifications on ‘Common and simplified requirements for processing investor’s service requests by RTAs and norms for submitting PAN, KYC data, and Nomination’ in a circular dated December 14, 2021.

In the case of KYC details kept by the RTA across all folios of the client, it is clarified that:

If the holder / claimant supplies the Client Master List (CML), RTA will update the holder’s folio(s) with information on 1) current address, 2) bank details, 3) email id, and 4) cell phone number from the details available in the CML.

Details that are already on file with the RTA will be replaced if the investor makes a particular request, as stated in the permission clause in Form ISR-1.

Only those details from the demat account that are not accessible for the physical folio in the RTA database will be updated in the regular routine.

Stock exchanges and depositories are advised to make necessary amendments to pertinent bye-laws, legislation and standards, operational instructions, as the case may be, in order to implement the clarifications and to bring them to the attention of their constituents, as well as to publish them on their websites.

The Securities and Exchange Board of India (Sebi), today clarified requirements for Registrars to Issue and Share Transfer Agents (RTAs) in processing investor service requests, as well as norms for providing PAN, KYC data, and nomination.

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