SEBI’s Proposed Framework for Unclaimed Funds and Securities: Protecting Investor Interests

In an effort to safeguard investor interests, the Securities and Exchange Board of India (SEBI) has proposed a structured framework to handle unclaimed funds and securities lying with stockbrokers. According to SEBI, as of January 31, 2024, unclaimed funds in the market had reached ₹323 crore, while unclaimed securities amounted to ₹182 crore.

These unclaimed assets often arise due to incomplete or incorrect demat account details, non-traceability of clients, or a lack of access for legal heirs and nominees. To mitigate these challenges, SEBI’s proposal outlines a process to systematically deal with such funds and securities.

Placing Unclaimed Accounts Under “Enquiry Status”

To address instances where investors are unreachable or their bank accounts cannot be credited, SEBI proposes placing such accounts under “enquiry status”.

• Stockbrokers will be required to reach out to clients using all feasible communication channels.
• If securities remain with the broker for over 30 days under enquiry status, they will be classified as unclaimed securities.
• If funds remain unclaimed for 1 year, they will be transferred to a dedicated bank account of the designated stock exchange on a quarterly basis.
• After 3 years, these funds will be moved to the Investor Protection Fund (IPF), a pool that is used to safeguard investors.

Enabling Investors, Nominees, and Legal Heirs to Claim Funds

To facilitate the retrieval process, SEBI has mandated that stock exchanges and stockbrokers provide an online search facility on their websites. This feature will allow:

• Investors to check for any unclaimed funds or securities in their name.
• Legal heirs and nominees to track and claim assets belonging to deceased investors.

Additionally, SEBI has outlined specific procedures and timelines for handling funds before they are transferred to the dedicated bank account or the IPF. This structured approach aims to streamline the recovery process and enhance investor protection.

SEBI’s Broader Investor Protection Measures

SEBI has been actively working towards enhancing transparency and protecting investors’ assets. In December 2024, the regulator proposed a new platform named Mutual Fund Investment Tracing and Retrieval Assistant (MITRA). This initiative is designed to help investors track and retrieve inactive mutual fund folios, further extending its commitment to investor security.

With these measures in place, SEBI continues to reinforce market integrity and ensure that investors’ assets do not remain unclaimed due to procedural inefficiencies.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/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. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.