SEBI CIRCULAR DATED 20.04.2018_Guidelines for RTA

Strengthening the Guidelines and Raising Industry standards for RTA, Issuer Companies and Banker to an Issue

SEBI CIRCULAR DATED 20.04.2018_Guidelines for RTA

Here is a brief write-up on  the SEBI Circular

I. Provisions with regard to Payment of Dividend/Interest/Redemption:

Dividend/Interest/Redemption MASTER FILE

a)      Dividend/Interest/redemption Master file (i.e. file containing detailed list of beneficiaries entitled for dividend/interest/redemption distribution by whatever name called on the record date) shall include:

·         Company Name,

·         Folio No./ DPID/Client ID,

·         Name of the first securities holder,

·         Dividend/interest/redemption payment date,

·         Dividend/interest/redemption amount,

·         Payee details,

·         Bank name, Bank account, Bank branch of the holder of securities, MICR number, Dividend/Interest/Redemption Warrant number,

·         Details of payment made through electronic channels such as RTGS/NEFT.

b)      The said file shall be shared with the Banker through a secured process.

c)      Copy Dividend/Interest/redemption Master file shall be maintained by the bank and the same shall be reconciled by the RTA and the Issuer Company.

BANK UPDATION

a)      RTA shall obtain account details along with cancelled cheque to update the securities holder’s data. The original cancelled cheque shall bear the name of the securities holder failing which securities holder shall submit copy of bank passbook /statement attested by the bank. RTA shall then update the bank details in its records after due verification.

b)      The unpaid dividend shall be paid via electronic bank transfer.

c)      In cases where either the bank details such as MICR ,IFSC etc. that are required for making electronic payment are not available or the electronic payment instructions have failed or have been rejected by the bank, the issuer companies or their RTA may ask the banker to make payment though physical instrument such as banker’s cheque or DD.

UNPAID INSTRUMENT

a)      Bank shall ensure that any instrument (such as demand drafts, dividend/interest/redemption warrants etc.) lying unpaid beyond the validity period of the instrument shall be cancelled and the dividend/interest/redemption amount transferred shall be credited back immediately to the relevant bank account of the Issuer Company.

b)      Banks should also provide the unpaid instrument details when reconciliation data is shared with Issuer Company / RTAs. This provision will come into effect after 30 days from the date of this circular.

REVALIDATION OF DIVIDEND

a)      Request should contain following:

Name of the Company, DPID/Client ID/Folio No. (as applicable), Original Instrument Number, MICR No., Security holder’s name, Payee’s name, Payee’s bank account Number, Bank name, reason for revalidation etc.

b)      RTA shall maintain records of the revalidation/re-issue requests.

Reconciliation of the Paid and Unpaid

a)      Reconciliation of the Paid and Unpaid details (including bank Transaction Reference Number, payee name etc.) of the Dividend/interest/redemption paid fortnightly during the initial validity of the instrument and after the expiry of validity period of the instrument, quarterly till transfer of funds to IEPF.

b)      Reconciliation data shall contain details of all DDs/new instruments issued/ electronic instructions sent in lieu of original dividend/interest/redemption payment. Details of old as well as new dividend instruments shall be provided.

c)      RTA shall also do the reconciliation and inform the Bankers/Issuer Companies in case of any discrepancies. The reconciliation files sent by the Banker shall be maintained by all the three entities, RTA, the Issuer Company, and the Banker as its record for a period of eight years.

PAYMENT RECORD

Details of the rejection of electronic remittance, dividend/interest/redemption instruments undelivered, dividend/interest/redemption instruments expired and subsequent payment of dividend/interest/redemption made through new instruments, including the status of payment of the same shall be linked to dividend/interest/redemption payment record of each of the specific folios by RTA .

II. Provisions with regard to Transfer/Transmission/Correction of Errors etc.

FOLIO ONCE ALLOTTED SHOULD NOT BE REALLOTTED

Folio once allotted to a person should never be re-allotted to any other person under any circumstances. Ceased folios numbers i.e. folios having nil balance should not be re-allotted to any other person.

HISTORY OF ALL TRANSACTIONS IN A FOLIO

History of all transactions in a folio (w.r.t securities held or dividend/interest/redemption issued in that folio, certificates issued or any other change) are linked to a particular folio for easy retrieval.

“Maker-Checker” concept

Follow the “Maker-Checker” concept in all of its activities to ensure that accuracy of data and a mechanism to check unauthorised transaction and record shall be maintained.

No back-end entry/updation /correction

All updation in the folio records shall be enabled only through front end modules. No back-end entry/updation /correction should be permitted. RTAs and Issuer Companies shall ensure that “System Log” having complete details for any change (viz. nature of change, user access history, user identification, date/time of change etc.) must be maintained. This provision will come into effect after 90 days from the date of this circular

CORRECTION OF ERRORS

Take prior approval from the Company similar to cases of transfers, transmissions etc.

MEMBERS DATA

RTAs shall provide to the Issuer Company a soft copy of Members data (having details inter alia Name, Address, Folio No, Number of Shares, Distinctive numbers, Certificate numbers, etc.) under due certification at the end of each quarter of a financial year. This data should also contain transaction in the physical folio during the period. The copy of these databases shall be maintained by Issuer Companies and the RTAs independently as permanent record.

REGISTER OF DEBENTURE HOLDERS

a)      RTAs shall provide to the Company a copy of the Register of debenture holders under due certification at the end of each quarter of a financial year.

b)      The register should contain information relating to name, father’s /husband’s name; address and occupation, if any, of each debenture holder; date of allotment; date of registration with the Registrar of Companies; the debentures held by each holder distinguishing each debenture by its number except where such debentures are held with a depository; distinctive number and certificate number of debentures; the amount paid or agreed to be considered as paid on those debentures; date of payment; date on which the name of each person was entered in the register as a debenture holder; date on which any person ceased to be a debenture holder; date of transfer of debentures; serial number of instrument of transfer; transferor’s name and folio number; transferee’s name and folio number, transfer number, number of debentures transferred and their distinctive numbers; date of transfer; and instructions, if any, for payment of interest.

c)      The copy of that Register of debenture holder shall be maintained by Issuer Companies and the RTAs independently as permanent record.

d)      Any returns filed with Registrar of Companies (ROC) or any other documents relating to company’s securities processed and compiled by the RTAs will also be maintained by the RTAs and a copy of the return shall be forwarded to the Issuer Company. The Issuer Companies will also independently preserve these data as filed with the ROC at their end.

STRICT CONTROL ON STATIONERY

RTAs and Issuer Companies shall frame a written policy and shall maintain strict control on stationery including blank certificates, dividend/interest/redemption warrants and shall periodically check by physical verification. The reconciliation report shall be maintained by the RTAs and concerned Issuer Company

CERTIFICATE PRINTING REGISTER

In addition to maintaining details of securities certificates issued or re-issued data in respective folios, RTAs shall maintain a certificate printing register/records containing, inter alia, details such as Date of Printing/issue, Folio No, Name in which printed, Certificate No, Distinctive Nos, Old Certificate No (in case is reprinting), Reason of printing etc.

HOLDING PHYSICAL SECURITIES

If the security holder is holding physical securities, RTAs, Issuer Companies and Depositories shall ensure that the Bonus securities against these folios shall mandatorily be issued in physical mode only. In other words, Bonus securities cannot be allotted in demat form with respect to folios where physical securities certificates are maintained.

Collection of copy of PAN, and bank account details of all securities holders

o   They preserve a verifiable record as on the date of this circular regarding the folios which do not have PAN/bank account details.

o   They send a letter under registered/Speed post seeking PAN and bank details (a copy of the PAN card and original cancelled cheque leaf /attested bank passbook showing name of account holder) within 90 days of the circular and two reminders thereof after the gap of 30 days. All the 3 letters will have 21 days’ notice period to provide the details.

o   In case of residents of Sikkim, the requirement of PAN Card be substituted with a valid Identity proof issued by Government.

o   Records of all communications sent, replies received and decisions taken in the matter shall be properly maintained. The same information shall also be linked to and available in each such folio.

o   Securities holders who are unable to respond to RTA call and provide PAN and bank details within 180 days of the circular or have informed that the securities available in their name as per the records of RTA does not belong to them, shall be subject to enhanced due diligence by Issuer Company.

o   A list of all such accounts with complete details shall be shared by the RTAs with the Issuer Companies within 30 days of completion of notice period of the last reminder.

Thereafter any transaction in the physical securities should done be with enhanced supervision by company and RTAs.

DUE DILIGENCE IN FOLLOWING CASES:

a)      dividend/interest/redemption remains unpaid for three years & above

b)      PAN / bank account details not available in the folio.

c)      Unclaimed suspense account

d)      IEPF suspense account set up pursuant to Companies Act 2013.

e)      Any other stringent criteria as decided by the Issuer Company and the RTAs.

RTAs shall maintain a list of such account folios and share with the Issuer Company at the end of every quarter of a financial year .RTAs shall have system based alerts for processing of all transactions in such account folios

MAINTAIN REGISTER

RTAs shall maintain a register containing details of records and documents destroyed.

Following are the Particulars:

A.     Description of the records and documents destroyed,

B.     Name of authority authorising the destruction,

C.     Date of authorization of destruction,

D.     Destroyed in whose presence (with signature) and date of destruction.

The authenticity of the register shall be verified during internal audit. The register shall be maintained till perpetuity.

III. Compulsory internal audit of RTAs

Internal audit on annual basis by independent qualified Chartered Accountants or Company Secretaries or Cost and Management Accountants and Certified Information Systems Auditor (CISA) who don’t have any conflict of interest.

Eligibility of auditors

A.     Minimum experience of three years in the financial sector.

B.     Appointed for a maximum term of five years, with a cooling-off period of two years

Audit shall cover

Investor grievance redressal mechanism and compliance with the requirements stipulated in the SEBI Act, Rules and Regulations made thereunder, and guidelines/circulars issued by SEBI from time to time.

Content of report

A.     Report shall state the methodology adopted, deficiencies observed, and consideration of response of the management on the deficiencies

B.     The report shall include a summary of operations and of the audit, covering the size of operations, number of transactions audited and the number of instances where violations / deviations were observed while making observations on the compliance of any regulatory requirement.

C.     The report shall comment on the adequacy of systems adopted by the RTAs for compliance with the requirements of regulations and guidelines issued by SEBI and investor grievance redressal.

D.     RTA shall submit a copy of report of the internal audit to Issuer Company within three months from the end of the financial year. Copy of the same shall also be preserved by the RTA.

E.      The Governing Council (i.e. Board of Directors, Board of Partners, proprietor etc. as applicable) of the RTA shall consider the report of the internal auditor and take steps to rectify the deficiencies, if any. The RTA shall send the Action Taken Report to Issuer Company within next one month and a copy thereof shall be maintained by the RTA.

F.      The Action Taken report shall be submitted in the following formula.

Serial No

Audit period & name of Issuer Company

Observations of the Auditor

Comments of the Board of the RTA

Corrective actions taken

G.     Audit observations along with the corrective steps taken by the RTA shall be placed before the Board of Directors of the Issuer Company. The Issuer Companies shall satisfy themselves regarding the adequacy of the corrective measures taken by the concerned RTA. If not satisfied with the corrective measures, Issuer Company may ask RTA to take more stringent corrective measures.

H.     The audit observations along with the corrective steps taken by the RTA shall be placed before the Board of Directors of the Issuer Company. The Issuer Companies shall satisfy themselves regarding the adequacy of the corrective measures taken by the concerned RTA. If not satisfied with the corrective measures, Issuer Company may ask RTA to take more stringent corrective measures.

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Ravi Garg    

Company Secretary                    

91-7838204665,

csravi2014@gmail.com