SEBI Issues norms to Demat Re-lodge shares

The Securities and Exchange Board of India established an operational framework to credit physical shares to demat accounts following a re-lodged request for transfer. We will explain these guidelines in detail to save readers the effort of reading several articles about this change. You will also find a timeline of when and how the rule affected existing regulations.

This timeline and the new regulations for demat accounts must be understood before we can understand why their circulars are important. SEBI, a statutory regulator in India, was established in April 1992. They are responsible for regulating Indian capital as well as the securities market. The regulation must be maintained on a regular schedule and must protect investors' interests. Simply put, SEBI is responsible for preventing malpractices in India's capital markets and ensuring investors have their rights and interests protected.

Before you read and understand the new regulations, it is important to know what a demat account actually is. A demat account can be used to hold securities or shares in electronic format. The short-term for "dematerialization" of shares is demat. Dematerialization is the conversion of physical shares into electronic shares. This is essential to facilitate the trading of shares in India. This also improves the security of these trading procedures as electronic documents allow for better tracking regulations. A depository participant (DP) is required in order to own demat shares and dematerialized shares. The DP acts as a mediator between the investor and the individual's account. An agent could be a bank, financial institution, or a SEBI-certified individual. For ease of transfer, some people link their savings and demat accounts.

In a SEBI circular dated September 7, 2019, it was stated that the fixed date for the re-lodgement or transfer of requests is March 31, 2021. Any shares transferred will be in demat form.

A SEBI circular, dated December 2, 2020, outlines the operational guidelines for crediting shares that have been transferred into an investor's Demat account.

SEBI has published a circular stating that the registrar will follow up on a re-lodged request for transfer. The share transfer agent (RTA), which retains physical shares, and informs the investor via a letter of confirmation about the execution of the transfer, will also be involved.

DP must receive a demat request within 90 days after the confirmation letter is issued. An investor must be reminded by the RTA within 60 days of receiving this confirmation letter. This letter is an integral part of the circular. The letter must be sent via registered or speed mail services. You can also send an email with a digitally signed signature. It must include information about the investor, the endorsement, and the folio.

- The details in this confirmation letter will be used by the DP to decide whether or not they should process the demat order.

If the investor has not sent a demat request within 90 days of the letter of confirmation being issued, the shares will be credited into the suspense demat account.

A SEBI circular, dated November 6, 2018, established certain standards for the transfer and storage of shares in physical form. The circular states that if the shares have a specific lock-in period, the RTA must inform the depository of the lock-in duration and its duration, while reviewing the demat request and verifying it. Shares with stringent lock-in periods are locked in demat format for six month from the date of registration.

It is crucial to realize that depositories must:

- Bring a notice about the contents of the circular to the attention of their participants and post or announce it on a website for them to see.

After the execution of the preceding directions, make necessary amendments to the rules and regulations.

The cut-off date to re-lodge share transfer requests is March 31, 2021. It is forbidden to hold securities that were transferred in a physical format. This was done on April 1. However, there is no rule that says investors can't hold shares in physical form. SEBI clarified that any transfer deeds sent before the April 1st 2019 deadline but returned or rejected by the document authorities can be re-logged with the required documents to strengthen it. This rule was published March 2019.

Over the last few years, SEBI has been monitoring the capital markets in India. This has resulted in constant improvements with regard to demat accounts. The publication of a guideline for crediting physical shares to the demat accounts is important because it increases the safety net that is based on how investors trade their shares. This guideline makes it easier for government officials to monitor certain financial instruments and report any misconduct. The SEBI has specified the dates that certain actions must be taken to eliminate any loopholes. It is important to follow the 90-day and 60-day rules. Otherwise, it could portray a negative image of the investor before the Indian regulating board. It is important to reiterate it again. A demat request must reach the DP within 90 days of the issuance date of the confirmation letters. Within 60 days, a reminder notice to the investor must be sent. These rules are extremely important and can prove to be harmful for the investor if they are not followed.