SEBI Issues Norms to Demat Re-Lodged Shares

SEBI has created some new norms for the Demat re-lodged shares. These regulations aim to promote transparency and make things simpler for investors. Moreover, by tackling the re-lodging of shares, SEBI will safeguard your interests as an investor and make it easy for people to comply. In this blog, you will learn about SEBI and the norms it introduced to streamline the investment process.

Key Highlights

• SEBI is a governing body that was created to promote transparency and fairness in the Indian financial market. 

• The new regulations demand that people with physical shares should consequently convert them into electronic form and depository accounts.

• Once investors have re-lodged their physical shares, they will receive a confirmation letter from the RTA together with 60-day reminders. This confirmation will be sent via post or email with an e-sign of RTA.

• Starting on April 1, 2019, all shares have to be dematerialized to support an electronic trading system.

About SEBI

The key regulator for the investment and securities market is the SEBI (Securities and Exchange Board of India). It was established under the SEBI Act in 1992 to promote transparency and fairness in financial markets. SEBI plays a very essential part in regulating and overseeing the market to protect investors and ensure that there is a level playing ground for all the participants.

Norms Against Dematerialisation of Re-lodged Physical Shares

SEBI officially announced on September 7, 2020, that all physical shares must be dematerialised and deposited into the Demat accounts of their holders before March 31, 2021. This move was intended to provide a mechanism for electronic share transfers. Moreover, on December 2, 2020, SEBI provided guidelines mentioning the conversion of re-lodged physical shares into electronic form. These measures aimed at facilitating easy and effective dematerialisation for the investors.

Here are the issued norms:

• Proceeds from any re-lodged share transfer will be processed, but physical shares will be held by the RTA (Registrar and Transfer Agent). You will be notified about the further process through a letter of confirmation regarding your re-lodged share.

• According to SEBI guidelines, a Demat request must be submitted to your Depository Participant (DP) within 90 days of receiving the confirmation letter.

• Within 60 days of receiving the confirmation letter, a reminder will be sent by the RTA. Meanwhile, you will be sent a confirmation via post and digital means, i.e., to your email address. This document will be digitally signed and approved by the RTA.

• As per the details given, the Demat application will be approved or disapproved by the depository participant.  If no such application is made within 90 days after sending the confirmation letter, the physical shares will be kept in a suspense escrow Demat account of the respective company.

• This suspense escrow Demat account is utilised for unclaimed shares of publicly traded companies.

• As per the SEBI (SEBI) regulations of April 1, 2019, you can no longer keep securities in the form of paper. It means investors must dematerialise their shares and cannot retain them in physical form.

SEBI’s ongoing supervision of the Indian capital market has resulted in consistent improvements in Demat accounts and their functions over the last few years. This published guidance on crediting physical shares to a Demat account is significant because it increases the safety net on which traders trade their shares. It also makes things simpler for the authorities to trace specific financial instruments in the event of fraud. 

To close any potential gaps in the system, the SEBI has created various procedures that must be completed on specified dates. The 90-day and 60-day requirements must be observed. Otherwise, the investor may be painted negatively by India’s regulatory authority. To iterate, a Demat request must be made to the DP within 90 days after the issue of the confirmation letter, and a reminder notification must be provided to the investor within 60 days of the publication of the confirmation letter. These criteria are critical, and failure to follow them may be costly to the investor.

Conclusion

India’s capital market is consistently being monitored by SEBI, which has improved Demat account practices rapidly. In 2021 new norms were introduced regarding the conversion of physical shares into dematerialized form. Moreover, these norms have promoted transparency in the financial instruments allowing the Indian government to maintain an accurate record of them. Therefore, one must have a Demat account to trade or invest with confidence. This enables you to unload your securities within certain regulations.

FAQs on SEBI Guidelines on Re-Lodged Shares