Sebi tightens the due diligence process for dematerialization of shares

New Delhi, November 5 () The market regulator, Sebi, asked the publicly traded companies on Tuesday to collect and send data on shareholders who physically hold shares to the depositaries before December 31, as part of strengthening due diligence process.

The transfer of securities held in physical form has been prohibited since April 1, 2019.

By presenting new requirements for the due diligence process, the regulator said it was being done to increase the integrity of the system in the processing of the dematerialization request with respect to the remaining physical actions.

After receiving company data, depositories must establish systems to validate any request for dematerialization received after December 31.

All publicly traded companies or their RTAs must provide depositors with the data of their members who hold shares in physical mode, namely the name of the shareholders, folio numbers, certificate numbers, distinctive numbers and PAN, etc. . (static database) as of March 31, 2019., no later than December 31, 2019, Sebi said in a circular.

RTA is the registrar of a problem and action transfer agent.

The regulator said that the deposit systems should recover the name of the registered shareholder with the folio number and the certificate number for each dematerialization request received after December 31 of the static database.

Later, these data would be validated with the names of the demat account holders available in the depository records.

In case there is a discrepancy in name in the share certificate and that of the effective beneficiary of the demat account, the deposit system should generate an alert, said Sebi.

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

According to Sebi, if there is a complete mismatch, the applicant can go to the issuing company or the RTA to establish their ownership. The circular has been addressed to depositaries, ACRs, stock exchanges and listed companies. RAM HRS