The Securities and Exchange Board of India (SEBI) has vide, the SEBI (Listing Obligations & Disclosure Requirements) (Fourth Amendment) Regulations, 2018, inserted the following proviso clause under Regulation 40(1) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 (SEBI LODR):
Provided that, except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository.
The said proviso clause provides that unless the securities are held in dematerialized form, no request for transfer of the securities shall be processed. The sole exception being transmission or transposition of securities.
Subsequently, SEBI vide circular dated 6th November, 2018, specified Standardized norms for transfer of securities in physical mode. The Circular was issued by SEBI subsequent to its discussion with the Registrars Association of India (RAIN) and the Depositories.
The SEBI Circular, drawing reference to the SEBI LODR (Fourth Amendment), 2018, provided for the modified procedure / documentation for transfer of securities in case of the following instances:
SEBI has, vide Circular dated 5th November, 2019, directed the Depositories and the Listed Companies / Registrar and Transfer Agents (RTA) to implement a due diligence process for processing of dematerialization request in respect of the physical shares.
The following are the salient features of the SEBI Circular:
The exact format for submission of the aforesaid information shall be jointly provided by CDSL and NSDL & shall be communicated to the Listed Companies / RTAs in due course.
Further, for each Demat Request Number (DRN) received after 31st December, 2019, the depository system shall retrieve the name of the Shareholder(s) recorded against the particular folio and Certificate number and then validate it against the name of the demat account holder(s) as available in the Depositories record.
The SEBI Circular has also directed CDSL and NDSL to make requisite amendments to its relevant byelaws, rules, regulations etc., for proper implementation of the Circular. It has also been advised that the status of implementation of the Circular shall be communicated to SEBI by CDSL & NSDL in their monthly report.
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