How has digitisation affected the wealth and equities of the older generation?

BusinessHow has digitisation affected the wealth and equities of the older generation?

Government of India banned the sale & purchase of any physical shares in 2018, wherein for any sale /purchase the investor would first have to get the physical shares converted into demat form. Though the conversion of physical shares certificates into the Demat (dematerialized) form is often considered a landmark decision to protect & streamline people’s investments, the change was a big blow to several investors & families who could not complete the process and are still struggling to get back & streamline their investments especially the elderly people. After this rule many of the investors have got their physical investments dematerialized however, it did cause many sleepless nights to shareholders or their family members who were accustomed to investing money in physical shares and were not or are still not able to liquidate the investments unless their assets are converted into Demat accounts. Ensued by the demise of many such elderly people after the implementation of the new rule, the problem becomes rather rampant for their descendants to trace such physical investments and get them transferred to their names. Several companies have come up with various corporate actions in the last many years, like the issue of bonus shares, stock splits, mergers & demergers. Investors who are holding physical shares might also be unaware of such corporate actions & benefits accrued to them. Had these investments been in the demat account, the benefits of the corporate actions would have directly come to the demat account.

No one would like to lose their or their parent’s hard-earned money, but to get such physical investments back in digital form is a herculean task due to a multitude of reasons. One faces several issues like death of shareholders without leaving any will or nomination, mismatch in names, change of address, loss of share certificates, mismatch in signatures, unregistered transfer deeds, change of citizenship/ residency status etc., because of which investors struggle to complete the proper documentation. The scenario is even more complex for investors who have changed their addresses & have moved abroad and hence have stopped receiving the dividends & now also face multi jurisdictional issues. If dividends for such investments are not claimed for seven consecutive years, then the shares & dividends get transferred to the Government as per regulations. As a result of this, there are shares worth ~INR 50,000 Crores and dividends worth ~ INR 5,700 Crores which have been transferred to the Government as per latest available data and market prices. If such investors wish to sell their investments, there is a complex process including multiple rounds of documentation and follow up with multiple parties.

Usually, people invest in shares to secure their future and provide financial stability to their children. Accumulation of resources is worthless if it fails to rescue one from a financial emergency. Consequently, many investors might not be able to utilise their investments at a time of need / urgency because of changes in such regulations as the ban on the sale / purchase of physical shares and transfer of unclaimed investments to the Government. They have to go through the long process of getting their investments dematted first. Though SEBI, along with the Ministry of Corporate Affairs (MCA), has introduced the Investor Education and Protection Fund (IEPF) to safeguard shareholders’ interest, the success rate is not very impressive due to lengthy and complicated procedures.

To sum up, Government’s initiative to digitise the investments, getting shares dematted, linking KYC and adding nomination are some steps in the right direction so that such investments are streamlined and centralised for the future. However, many investors find the current process very cumbersome & technical and because of this, they struggle to complete the proper documentation.

Sanchit Garg is the co-founder of GLC Wealth

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