SEBI Tightens Due Diligence Process For Share Dematerialisation
SEBI headquarters in Mumbai. (Photographer: Santosh Verma/Bloomberg). 

SEBI Tightens Due Diligence Process For Share Dematerialisation


The Securities and Exchange Board of India on Tuesday asked listed companies to compile and submit data about shareholders holding shares in physical form to depositories by Dec. 31, as part of strengthening the due diligence process.

Transfer of securities held in physical form has been barred from April 1.

Coming out with fresh requirements for the due diligence process, the watchdog said it was being done to augment the integrity of the system in processing of dematerialisation request in respect of the remaining physical shares.

After receiving data from the companies, depositories have to put in place systems to validate any dematerialisation request received after Dec. 31.

"All listed companies or their RTAs (registrar and share transfer agents) shall provide data of their members holding shares in physical mode, viz the name of shareholders, folio numbers, certificate numbers, distinctive numbers and PAN etc (static database) as on March 31, 2019, to the depositories, latest by Dec. 31, 2019," SEBI said in a circular.

RTA is registrar to an issue and share transfer agent.

The regulator noted that depositories' systems should retrieve the shareholder name recorded against the folio number and certificate number for each dematerialisation request received after Dec. 31 from the static database.

Later, this data would be validated against the demat account holders' names as available in the records of the depositories.

In case there is a mismatch in name on the share certificate and that of the beneficial owner of demat account, the depository system should generate an alert, SEBI said.

In instances, where such alerts have been generated, additional documents, including Aadhaar card copy, of the individual copy would be sought.

According to SEBI, if there is a complete mismatch the applicant can approach the issuer company or the RTA for establishing his or her ownership.

The circular has been addressed to depositories, RTAs, stock exchanges and listed companies.

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