SEBI CIRCULAR DATED 05.11.2019 - Due Diligence for Dematerialization of Physical Securities

SEBI UPDATE DATED 05.11.2019

Sub: Enhanced Due Diligence for Dematerialization of Physical Securities

Purpose of the Circular : 

1. To monitor the system in processing of dematerialization request in respect of the physical shares

2. To restrict the Transfer of Physical Shares after 01.04.2019

SEBI: Securities and Exchange Board of India has vide  In terms of Regulation 40 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (IV Amendment) Regulations, 2018 (LODR), restrict the transfer of securities held in physical mode till 31.03.2019.

Basis of Circular: Securities and Exchange Board of India (SEBI) had issued the Standardised norms with respect to documentation / procedure for transfer of physical securities vide SEBI circular No. SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 dated November 06, 2018.(Click here to download the Circular)

Due Diligence Process

Compliance for Listed companies :  All Listed companies or their RTAs shall provide data of their members holding shares in physical mode as on March 31, 2019, to the Depositories, latest by December 31, 2019, viz

1. name of shareholders,
2. folio numbers,
3. certificate numbers,
4. distinctive numbers and
5. PAN etc. (hereinafter, static database)

Compliance for Depositories : 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. Accordingly, the depository system shall retrieve the shareholder name(s) recorded against the folio number and certificate number in Static Data for each DRN request received after this date and validate the same against the demat account holder(s) name as available in the records of the Depositories.

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, as per SEBI circular of November 06, 2018, shall be sought, namely

• Copy of Passport
• Copy of legally recognized marriage certificate
• Copy of gazette notification regarding change in name
• 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.

 Steps to be taken by Depositories:

1. make necessary amendments to the relevant byelaws, rules and regulations for the implementation of the above directions, as may be applicable
2. bring the provisions of this circular to the notice of their participants and also
3. disseminate the same on their websites; and communicate to SEBI, the status of implementation of the provisions of this circular in their Monthly Report

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Ravi Garg
Company Secretary 

Mob.: +91-7838204665,
Email : csravi2014@gmail.com

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