Safeguards to address the concerns of the investors on transfer of securities in dematerialized mode
Summary
This circular amends Para 1.12 of the SEBI Master Circular for Depositories to strengthen safeguards against unauthorized transfer of securities in dematerialized mode. It mandates specific procedural controls for Depository Participants regarding Delivery Instruction Slips, including prohibitions on pre-signed slips and requirements for verification in dormant accounts. The provisions apply immediately to depositories and their participants to harmonize inactive account classifications and prevent fraud.
Text
The depositories shall give more emphasis on investor education particularly with regard to careful preservation of Delivery Instruction Slip (DIS) by the BOs. The Depositories may advise the BOs not to leave “blank or signed” DIS with the Depository Participants (DPs) or any other person/entity.
The DPs shall not accept pre-signed DIS with blank columns from the BO(s).
If the DIS booklet is lost / stolen / not traceable by the BO, the same must be intimated to the DP immediately by the BO in writing. On receipt of such intimation, the DP shall cancel the unused DIS of the said booklet.
The DP shall also ensure that a new DIS booklet is issued only on the strength of the DIS instruction request slip (contained in the previous booklet) duly complete in all respects... Further, in case the request for issuance of the DIS booklet is received in an inactive/dormant account, the DIS booklet shall be delivered at the registered address of the BO... Such issuance of DIS shall be authorized by the Compliance Officer or any other designated senior official of the DP.
An inactive/dormant account refers to an account where no transaction has taken place for a continuous period of 12 months. A credit in the demat account through purchase of securities and voluntary corporate action may be considered as a transaction... However, any credit due to involuntary corporate action may not be considered as transaction for assessing the dormancy.
The DPs shall not issue more than 10 loose DIS to one account holder in a financial year (April to March). The loose DIS can be issued only if the BO(s) come in person and sign the loose DIS in the presence of an authorised DP official.
The DPs shall put in place appropriate checks and balances with regard to the verification of signatures of the BOs while processing the DIS.
The DPs shall cross check with the BOs under exceptional circumstances before acting upon the DIS.
The DPs shall mandatorily verify with a BO before acting upon the DIS, in case of an inactive/dormant account, whenever any security in such account is transferred at a time. Such verification by DPs shall require a recorded phone call on registered number of BO by the authorized official of the DP and shall be additionally authorised by the Compliance officer...
However, in case of active accounts, such verification may be made mandatory only if the BO account has 5 or more International Securities Identification Number (ISINs) and all such ISIN balances are transferred at a time. The authorized official... shall record the details... Such verifications shall be additionally authorized by the Compliance Officer...
This Circular amends Para 1.12 of SEBI Master circular for Depositories dated October 06, 2023.
The provisions of this circular shall come into effect from April 1, 2024.
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Source: SecMarx — Safeguards to address the concerns of the investors on transfer of securities in dematerialized mode. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.