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The Securities and Exchange Board of India (SEBI) has issued guidelines for the regulation of Demat accounts. To understand it, you need to know what a Demat account is and what exactly SEBI circulates in its rules and regulations. SEBI, established in April 1992, is a statutory regulatory body responsible for overseeing the operation of the stock market and listed companies. Together, we can achieve the goal of transparent and safe investing in the stock market. In other words, you can say that the role of SEBI is to prevent any malpractices in the Indian stock market and protect the rights and interests of investors.
Now, you need to understand the Demat account. A Demat account is an online account that functions to store all your financial holdings in a digital format. Demat accounts convert physical shares into dematerialised ones, i.e., the digital format, so you can sell or buy different types of securities from a broker platform. To own or dematerialise shares, first, you need to open a Demat account with a depository participant (DP), a medium between an investor and an individual trader. A DP is a certified financial firm approved by SEBI to provide stock trading and Demat account services. Just like transferring money from your bank account to another bank account online, a Demat account allows you to transfer shares or other financial instruments, except money.
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About SEBI
SEBI is known as the Securities and Exchange Board of India. It was formed in April 1992. The work of SEBI is not so easy; it needs to improve its rules and regulations and way of conducting audits regularly. It also needs to protect the interests of companies and investors in the stock market to ensure the healthy working of the Indian Stock market.
What Are the Norms Issued Against Demat Re-lodged Share Transfer Requests?
The SEBI put out a circular on the 7th of September 2020, which states that the 31st of March 2021 was going to be the final date for the share transfer request and to convert physical shares to an electronic format and transfer them into your Demat account. Well, there was another circular issued on the 2nd of December 2020, which specified the operational regulations for the dematerialisation of re-lodged physical shares.
Here are some SEBI guidelines:
- The proceeds of any re-lodged share transfer will be processed, but the RTA (Registrar and Transfer Agents) will hold on to the physical shares. After that, you will be informed regarding the further process through a letter of confirmation regarding your re-lodged share.
- According to the SEBI guidelines, you need to submit a Demat request to the Depository Participant (DP) within 90 days of receiving the confirmation letter.
- You will get an additional remainder from the RTA after 60 days of the issuance of the letter of confirmation of shares. You will receive a postal confirmation along with the digital confirmation by email for the same, which is digitally signed and endorsed by the RTA.
- Working on the provided details, the Depository Participant (DP) will decide whether to proceed with a Demat request or not. But if 90 days after the letter of confirmation was issued, the Demat owner sent no Demat request, the physical share will be moved to the company’s suspense escrow Demat account.
- This depository account for unclaimed shares of listed companies is called the suspense escrow Demat account for the company.
- As per the guidelines of SEBI proposed on the 1st of April 2019, holding securities that have been transferred in a physical form has been discouraged and discontinued. Therefore investors cannot hold shares in a physical form under any condition.
Conclusion
Dematerialisation of physical shares is important, and it’s not possible to trade in the physical shares. So, in order to improve trading and avoid any fraud, you need to convert the shares into a digital format, which will positively eliminate the loopholes in the stock market. As a modern trader, you must know about the function of online trading and the vital role of online Demat accounts.