SEBI Extends Deadline for Submission of KYC Documents by physical security holder

Introduction:

The Securities and Exchange Board of India (SEBI) has recently extended the deadline for the submission of Know Your Customer (KYC) documents by physical security holders. This move comes as part of SEBI’s efforts to streamline investor service requests and ensure compliance with KYC norms. The following article provides an overview of the extension, actions required by listed companies, and the implications for payment of dividends and corporate actions.

BACKGROUND

• SEBI had vided its circular dt: November 3, 2021, and December 14, 2021, [‘KYC Circulars’] had prescribed the common and simplified norms for processing investor’s service requests by RTA’s and norms for furnishing PAN, KYC details and Nomination. Vide these KYC Circulars SEBI had inter-alia prescribed April 1, 2023, as the date by which KYC documents [i.e., PAN, nomination, contact details, bank account and specimen signature] shall be furnished.
• Further SEBI vide its circular dt: March 16, 2023 [‘SEBI Circular 2023’] superseded KYC Circulars. SEBI Circular 2023 was effective from April 1, 2023. Vide SEBI Circular 2023 SEBI had inter-alia extended the date for furnishing of KYC documents [i.e., PAN, nomination, contact details, bank account and specimen signature] till September 30, 2023. SEBI has further stated that if any of the KYC documents [i.e., PAN, nomination, contact details, bank account and specimen signature] are not made available by September 30, 2023, by physical security holders then folios of these physical security holders shall be freezed from October 1, 2023.

• SEBI had reiterated vide SEBI Circular 2023 that physical security holders whose folios are frozen would be eligible to lodge grievance or avail any service requests from RTA only after submitting requisite documents for updating KYC details.
• SEBI vide SEBI Circular 2023 highlighted that physical security holders whose folios are freeze. SEBI Circular 2023 stated that security holders whose folios are frozen would be eligible for payment of dividend, interest, or redemption amount in respect of frozen folios only through electronic mode with effect from April 1, 2024. Listed companies will have to send an intimation to the security holder that such payment is due and after complying with KYC norms payment shall be made electronically.
• In this regard SEBI had received representations from investors regarding difficulties faced by them with regard to certain procedural aspects of the provisions and varied interpretations with regard to the documentation required for processing investor service requests and hence based on the investor feedback and consultation with Registrars Association of India (RAIN) to extend the due date of September 30, 2023 for submission of KYC documents [i.e., PAN, nomination, contact details, bank account and specimen signature]

Introduction

• SEBI has now vided its circular dt: September 26, 2023, [‘KYC September 2023 circular’] extended the last date for submission of KYC documents [i.e., PAN, nomination, contact details, bank account and specimen signature]. SEBI has now stated that KYC documents [i.e., PAN, nomination, contact details, bank account and specimen signature] can be submitted by physical security holders by December 31, 2023. KYC September 2023 circular has to be read in jointly with SEBI Circular 2023.
• If we peruse the link of circulars issued by SEBI for updation of KYC document, SEBI has been reducing the extension timelines.
• Consistent reduction of timelines for submission of KYC documents: Initially SEBI had vided its KYC Circulars asked physical security holders to submit KYC documents by April 1, 2023 (i.e., a period of one year was provided to physical security holders to submit KYC documents), then SEBI vide its SEBI Circular 2023 extended the due date by six months till September 30, 2023.
• Now SEBI has vided its KYC September 2023 circular has given an extension of three months i.e., till date December 31, 2023. So, SEBI has consistently reduced timelines for submission of KYC documents by physical security holders.

ACTIONABLEs:

• Placing a copy of circular on website of listed company: SEBI has vided its KYC September 2023 circular has asked listed companies to disseminate a copy of this circular on its website.
• Making physical security holders aware of extended due date for submission of KYC documents: SEBI has stated that listed companies shall bring provisions of KYC September 2023 circular to the notice of respective constituents viz. all physical security holders. Listed companies will have to intimate physical security holders that they have still time to update their folios with KYC documents till December 31, 2023.
• Freezing of folios and payment of dividend, interest or corporate action: SEBI has vided this KYC September 2023 circular has mentioned that only relevant provisions of September 2023 circular are superseded. So, provisions relating to due date for submission of KYC documents and freezing of folios stands superseded. It needs to be highlighted that provisions of September 2023 Circular highlighting freezing of folios in case of non-submission of KYC documents would still be valid and the freezing of folios for non-submission of KYC documents till December 31, 2023, by physical security holders would start from January 1, 2024. Further in case the folios remain freezed on or after April 1, 2024 then payment of dividend, interest, or redemption amount would be done only through electronic mode but only on compliance with KYC norms. Listed companies would be intimating physical security holders to update KYC and once KYC is updated payment of dividend, interest, or redemption amount would be done.

Conclusion:

SEBI’s extension of the KYC document submission deadline provides physical security holders with additional time to ensure compliance with KYC norms. Listed companies are required to communicate this extension to their stakeholders, and it is essential for physical security holders to update their KYC details by the revised deadline to avoid freezing of their folios and to enable electronic payments of dividends and other financial transactions.

For further details, refer to the SEBI Circulars mentioned in the source section of this article.

Source:

This article was authored by Ms. Ruchira Pawase, Research Associate, and Mr. Vallabh Joshi, Senior Manager.