Securities and Exchange Board of India (SEBI)

Introduction

DigiLocker, an initiative by the Ministry of Electronics and Information Technology (MeitY), serves as a secure digital repository designed to reduce paper dependency and enable seamless access to verified documents. As digital services gain traction across governance and the financial sector, ensuring compliance with its regulations has become critical for both organizations and individuals. The platform provides users with a digital wallet for accessing authenticated records such as Aadhaar, PAN, driving licences, birth and death certificates, bank statements, insurance policies, and New Pension Scheme details. Governed by the Information Technology Act, 2000, and aligned with the Digital India Programme, its compliance framework is shaped by periodic directives from MeitY, the National Informatics Centre (NIC), and regulatory authorities. Notably, the involvement of bodies like SEBI underscores its significance in secure document handling for capital markets and investor protection.

Key Compliance Requirements:

Compliance Reporting Requirements:

Who Needs to Report

1. Entities leveraging DigiLocker APIs for verification must report their transactions to MeitY and NIC
2. Market participants (e.g.- stockbrokers, fintech firms) must submit compliance reports to SEBI

What Needs to Be Reported

1. User authentication logs to ensure adherence to security standards.
2. Access logs for document retrievals to maintain transparency and Data sharing practices in alignment with privacy regulations

SEBI and DigiLocker Collaboration:

To enhance investor protection and minimize unclaimed assets, SEBI has directed Asset Management Companies (AMCs), depositories, and KYC Registration Agencies (KRAs) to integrate their systems with DigiLocker. This initiative enables easier access to financial records and ensures smoother asset transmission.

KRAs, which serve as centralized KYC data repositories, play a key role by verifying and sharing nominee details through DigiLocker. They also notify registered Data Access Nominees in the event of an investor’s death, streamlining access to essential documents.This collaboration combines regulatory oversight with digital innovation, promoting a more transparent and accessible financial ecosystem.

Features of the Initiative:

1. Access to Securities Holdings:
   DigiLocker has expanded its services, allowing users to fetch and store their Statements of Holdings for shares and mutual fund units from their demat accounts, along with their Consolidated Account Statements (CAS).
2. Facilitating Asset Transmission:
   KRAs facilitate the smooth transfer of assets to the rightful heirs or nominees, especially in cases of death.
3. Nomination Facility for Seamless Access:
   Users can now appoint Data Access Nominees in DigiLocker, granting them read-only access for easy heir information retrieval.
4. Automated Notification to Nominee:
   The DigiLocker system shall automatically notify the Data Access Nominee, thereby facilitating the initiation of the transmission process with the relevant financial institutions.

Reduction of Unclaimed Assets in Indian Securities Market

1. Addressing the Issue of Unclaimed Assets- Unclaimed assets in the securities market, including shares, dividends, bonds, and mutual funds, remain a persistent challenge due to outdated KYC details, lack of investor awareness, and inheritance complexities.
2. DigiLocker’s Role as a Digital Public Infrastructure- By leveraging DigiLocker, financial institutions and regulatory bodies can facilitate the seamless retrieval and verification of investor documents, aiding in:
   • Digital KYC Updates: Ensuring that investors have access to their securities by linking DigiLocker with their financial accounts.
   • Automated Claim Processing: Simplifying the process for heirs to claim unclaimed assets by digitally verifying identity and inheritance documents.
   • Regulatory Compliance: SEBI and depositories can leverage DigiLocker integration to maintain up-to-date investor records, thereby helping to reduce the incidence of unclaimed assets.

Potential Benefits

Conclusion

As digital adoption accelerates, compliance with DigiLocker regulations is critical for businesses, financial institutions, and government entities. Maintaining alignment with evolving guidelines and adopting best practices will ensure the secure, efficient, and legally compliant use of DigiLocker across various sectors. Collaboration between SEBI along with intermediaries and DigiLocker allowing users to store and access demat and mutual fund holding information and create a transparent and efficient system for managing financial assets, ultimately benefiting investors and their families. DigiLocker is designed to simplify the transmission of assets to legal heirs and reduce the volume of unclaimed assets in the Indian securities market.

Disclaimer

The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.