SEBI’s New Update: Promotion of Dematerialisation of Securities

The capital market regulator, the Securities and Exchange Board of India (SEBI) has released a new proposal to promote the dematerialisation (demat) of securities. Under the new proposal, all the listed companies are required to issue securities exclusively in demat form following corporate actions such as stock splits, share face value consolidations, mergers, or demergers.

In cases where an investor does not have a demat account, SEBI’s proposal mandates that issuing companies open a separate demat account for the investor, with an appropriate ledger of ownership or a suspense escrow account for managing such securities.

SEBI’s Objective

The benefits of dematerialisation are significant, including reduced risk of fraud and forgery, prevention of loss or damage to securities, faster and more efficient transfers, enhanced transparency and regulatory oversight, decreased legal disputes, and cost savings for both investors and companies.

Despite these advantages, some investors still hold securities in physical form. While it remains legally permissible to do so, such investors can only sell or transfer their securities once they are dematerialized.

To further encourage the shift to demat holdings and prevent the issuance of new physical securities, SEBI has proposed that existing physical certificates be converted into demat form, with no new physical certificates being created.

SEBI has invited public comments on the proposals until February 4.

Amendment to SEBI (LODR) Regulations, 2015

“In order to achieve the objective as stated… It is proposed to amend SEBI (LODR) Regulations, 2015 to mandate the issuance of securities only in Demat form in case of sub-division/split/consolidation of the face value of securities and scheme of arrangement to encourage demat holding of securities,” the regulator said.

Additionally, the regulator has proposed modifications to certain provisions of LODR (Listing Obligations and Disclosure Requirements) norms. This includes the requirement of maintaining the “proof of delivery” relating to the intimation of “minor difference in the signature” and major difference in signature or non-availability of the signature should be omitted.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.