Enhanced Due Diligence for Dematerialization of Physical Securities
Summary
This circular mandates enhanced due diligence for the dematerialization of physical securities following the ban on their transfer effective April 1, 2019. It requires listed companies to provide a static database of physical shareholders to depositories by December 31, 2019. Depositories must validate dematerialization requests against this data and enforce additional documentation in case of name mismatches.
Text
In terms of Regulation 40 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (IV Amendment) Regulations, 2018 (LODR), transfer of securities held in physical mode is not permitted w.e.f. April 01, 2019.
All Listed companies or their RTAs shall provide data of their members holding shares in physical mode... to the Depositories, latest by December 31, 2019.
Depositories shall capture the relevant details from the static database... and put in place systems to validate any dematerialization request received after December 31, 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.
In instances, where such flags / alerts have been generated, the following additional documents explaining the difference in name... shall be sought, namely i. Copy of Passport ii. Copy of legally recognized marriage certificate iii. Copy of gazette notification regarding change in name iv. Copy of Aadhar Card
In the 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 the above directions, as may be applicable
Depositories shall bring the provisions of this circular to the notice of their participants and also disseminate the same on their websites
Depositories shall communicate to SEBI, the status of implementation of the provisions of this circular in their Monthly Report.
The Stock Exchanges are advised to bring the provisions of this circular to the notice of Listed Entities and also to disseminate the same on their websites.
Source: SecMarx — Enhanced Due Diligence for Dematerialization of Physical Securities. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.