Many people struggle to claim or liquidate investments and insurance policies due to procedural issues. Follow these well-defined rules.
With the financial regulators - the Securities and Exchange Board of India, the Insurance and Regulatory Development Authority of India and the Reserve Bank of India - introducing stringent guidelines in case of Know-Your-Customer (KYC) and other transaction-related deals, all financial institutions have become wary and are insisting proper procedure is followed in every transaction.
Consequently, the paperwork involved for investment has been increasing.
While all these changes are bringing in more transparency, in terms of transactions as well as smooth passing of wealth, things are also likely to take time to settle down till financial institutions and investors, bank customers and policyholders are on the same page.
An example: Only a few years earlier, if you wanted to invest in a mutual fund, all you needed was a cheque and the form from the fund house.
Then, Permanent Account Number (PAN) details and address proof were made compulsory.
Last year, investors were asked to update KYC with more details, including income levels.
There are also other common problems older investors face. The most common is change in signature.
“In such situations, agents sometimes try to take advantage of investors by making the problem appear bigger than it actually is,” says Amit Kumar Roy, chief distribution officer at Aegon Life Insurance Company.
If you face any procedural problems with your investments, don’t worry. There are well-defined procedures that can take care of the issues.
Mutual fund and insurance
As these are long term products, the problems faced by investors are common and resolutions are similar, too.
Signature change or mismatch: This is a common problem that many face.
Over years, many forget their signatures. In case of mutual funds, the investor’s signature needs to be verified by the bank, according to a Tata Asset Management spokesperson.
The company has a format which requires the bank to confirm the signature, account details linked to the folio and also mention the PAN details in the bank’s records.
In the case of insurance, it may depend on whether the customer signature has a variance or he has completely forgotten it.
“In case of any variance, the customer can submit the maturity request in person at any branch office, with a self-attested signature proof and other required documents for the maturity claim,” says Vijaya Nene, director, operations and services, at PNB MetLife India.
If the person has forgotten his signature, he needs to give one verified by the bank.
“The best and easiest way to avoid signature mismatch issues entirely is to go online, using a password than a signature,” says Srikanth Meenakshi, co-founder and chief operating officer of FundsIndia.com.
Error in name: The individual will need to apply and submit KYC acknowledgement with a PAN card or an Aadhaar card copy.
“If the policyholder changes his name, a copy of the new name as per official gazette would be required,” says CL Baradhwaj, chief risk and compliance officer, Bharti AXA Life Insurance. He adds if only the maiden name changes after marriage, the person has to give a copy of marriage certificate.
Investment-linked bank account is closed: This is fairly simple. You can give proof that your bank account is closed with the application for adding a new bank account.
“One can link up to five accounts with a folio. Investors should make use of this,” says Harshad Chetanwala, head, customer delight, at Quantum AMC.
A minor turns 18: Once a child becomes a major, the KYC, bank details and signature need to get updated in the investment records.
The signature needs to be attested by the investor’s bank. “Guardians cannot transact once the minor becomes a major. AMCs therefore, intimate investors two months in advance to update the records,” says Seemant Shukla, head of sales and marketing, Edelweiss Asset Management.
Investor passes away with no nominee listed: This process can be tedious.
For an investment value of less than Rs 2 lakh in a mutual fund, the fund house needs a lot of documents - which include a letter from claimant, death certificate (notarised), KYC of claimant, new bank details attested by the bank, indemnity bond by all legal heirs, individual affidavit by all legal heirs and documents evidencing the relationship of the claimant with the deceased.
For higher investment value, fund house will also need notarised copy of the probated will or legal heir/succession/claimant certificate by a court or letter of administration in case of intestate succession, according to the operations team at Motilal Oswal AMC.
For insurance, similar documents should be submitted but there’s no distinction on amount.
There are times when a nominee is not the legal heir. By law, a nominee is only a custodian of money.
“But under the life insurance contract, the money is paid to the nominee. If it is challenged by a legal heir in court, the insurer would wait for the court’s order,” says a Future Generali Life Insurance spokesperson.
Illiquid stocks: On the BSE, there were 374 illiquid stocks as of March.
“The simplest option in such cases is to wait for transactions to start happening in the stock,” says Nikhil Kamath, co-founder and director at Zerodha.
There are also several brokers which arrange for buyers of illiquid shares.
“Although the price may be lower in an off-market transaction, it gives the ease of exiting the entire lot in one transaction, as against selling small quantities on the exchange,” says Abhishek Anand, fund manager, Centrum Broking.
If there’s zero liquidity, the investor will need to find an off-market buyer or brokers who deal with such cases.
“If there is a large quantity of shares, one can approach the company secretary or investors’ grievance cell for possible takers,” says Anand.
Delisted securities: This can be voluntary, when a company wants to go private.
There are times when companies are forced by the exchange or the regulator because the company has not complied with listing requirements or failed to meet reporting deadlines, etc.
“It is usually a sign that the company has fallen on troubled times. In a forced delisting, minority shareholders of the company may end up getting a shoddy deal as they have no option but to sell their shares at the price decided by the exchange,” says Vikas Singhania, executive director at Trade Smart Online.
If you have not tendered stocks in the delisting process, you have no option but to find a broker or buyer who can buy these, says Kamath of Zerodha.
Lost share certificates: For these, first file a police complaint.
You will need to prepare an affidavit, surety and an indemnity bond, according to the operations team of Motilal Oswal Securities.
Then, the investor will need to publish a general notice in a government gazette and present all documents at the company.
It takes about six weeks for duplicate share certificates to be issued.
Transfer of inherited property: In case of death of the owner of immoveable property, title to the property devolves on his legal heirs either by testamentary succession (through a will) or by inheritance (under laws of succession when no will is executed).
“The legal heir needs to make an application to the revenue authorities for updating his name in the records along with a copy of probate granted by a competent court, if the deceased owner had made a will, or a copy of the letters of administration granted by a competent court - if no will was made by the deceased owner,” says Ashoo Gupta, partner, Shardul Amarchand Mangaldas & Co. He adds, in rural areas, instead of a will or probate, a copy of the death certificate along with an indemnity bond from the legal heirs is generally accepted.
Signature mismatch: The account holder needs to establish his identity by showing KYC documents and contact details.
The bank’s officer will cross check KYC details and photo submitted in the bank earlier while opening the account.
“He can then see the original signature and change his signature, if he so wishes,” says a Federal Bank spokesperson.
Account holder passes away: If the deceased account holder had registered the nominee with the bank, the nominee needs to submit a claim form giving complete details of the accounts, along with the death certificate, says Praveen Kutty, head - retail and SME Banking, DCB Bank.
If there is no nominee, the legal heirs shall jointly submit a request letter and legal heirship certificate, along with the death certificate. If the amount involved is above Rs 25,000, an indemnity bond along with two sureties will also be required.
NOMINEE VS LEGAL HEIR
- Appoint a legal heir as nominee to avoid procedural hassles
- A nominee is deemed to be a trustee or a custodian of assets
- Legal heirs are rightful owners of all assets except shares and debentures, where the nominee supersedes the legal heir
- Draw up a clear and unambiguous will, to pass on assets to the intended person
- Your name should match with that on your bank account
- Ensure the form is filled by you, not the agent
- Invest online to cut paperwork
- Link at least two bank accounts with your investments
- Mention nominee in the application form
- Nominee should be Know Your Customer-compliant to stake claim in case of investor’s death
Illustration: Uttam Ghosh/Rediff.com