The Securities and Exchange Board of India on 24th July 2020 has directed the depositories to put in place a system for capturing and recording all types of encumbrances within one month from the date of this circular.
The SAST (Substantial Acquisition of Shares and Takeover) Regulations requires promoters of a company to disclose details of their encumbered shares. Depositories shall follow processes and other norms similar to that stipulated for the purpose of capturing and recording non-disposal undertaking (NDUs) in Depository system. This is apart from pledge and hypothecation, whose processes and specific norms are separately provided in SEBI (Depositories & Participants) Regulations, 2018.
The Depository Participant shall not facilitate or be a party to any type of encumbrance outside the Depository system as outlined herein and to freeze and unfreeze instructions executed by the Participant for recording all encumbrances will be subject to 100% concurrent audit.
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