The Securities and Exchange Board of India (SEBI) in its Circular dated 5th November 2019, has directed the listed companies, depositories and registrar and transfer agents (RTAs) to enhance due diligence for dematerialization of physical securities.
Since April 1, transfer of securities held in physical mode is not permitted as per Regulation 40 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (IV Amendment) Regulations, 2018. To augment the integrity of the system in processing of dematerialization request in respect of the remaining physical shares, SEBI has directed the listed companies to implement the following due diligence process:
- All Listed companies or their RTAs are required to provide data of their members holding shares in physical mode, viz the name of shareholders, folio numbers, certificate numbers, distinctive numbers and PAN etc. as on March 31 to the depositories, latest by December 31, 2019.\
- On the other hand, depositories are required to capture the relevant details from the static database as well as validate any dematerialization request received after 31st December 2019
- In case of mismatch of name on the share certificate(s) vis-à-vis name of the beneficial owner of demat account, the depository system shall generate flag / alert
- However in case of complete mismatch of name on the share certificate(s) vis-à-vis name of the beneficial owner of demat account, the applicant may approach the Issuer company / RTA for establishing his title / ownership
Depositories shall make necessary amendments to the relevant byelaws, rules and regulations for the implementation of such directions, as may be applicable and communicate to SEBI the status of implementation of the provisions of this circular in their monthly report.
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