On October 20, 2020, the NSDL issued a circular (NSDL/POLICY/2020/0138) regarding the operational guidelines in respect of OTP for off market transfers. The circular drew the attention of participants to an earlier circular issued by SEBI, on August 27, 2020 (circular number SEBI/HO/MIRSD/DOP/CIR/P/2020/158).
The SEBI circular mentioned above dealt with the execution of Power of Attorney (PoA) by the client in favour of the stockbroker/stockbroker and Depository Participant. As per that circular, depositories were required to obtain the consent of the client the One Time Passwords (OTPs) for all off market security transfers from the client’s demat account. This was to be effected from November 1, 2020.
In the context of this requirement, the NSDL circular (NSDL/POLICY/2020/0138) regarding the operational guidelines in respect of OTP for off market transfers laid out the following directives for participants.
1. For off-market transfers executed on or after November 1, 2020, the off-market transfer instructions are to be processed only after obtaining consent from the transferor client by way of OTP confirmation.
2. On the date of executing the said transfer, a link is to be generated by NSDL and sent to the client’s mobile number and email ID attached with the demat account.
3. Upon clicking the link, the client will be redirected to a web page where the details of the off-market transfer instructions for the specific demat account, which are pending for the client’s confirmation, will be displayed. Once the OTP is confirmed, the off market transfer instruction(s) as selected by the client will be processed, subject to the payment of stamp duty, as applicable.
4. To facilitate the above processes, DP(s) are to ensure that clients have updated the mobile numbers and email IDs linked to their demat accounts.
5. Any transactions that are pending for OTP confirmation will reflect a new status called “Pending for OTP Confirmation.” In case the OTP confirmation is not completed by EOD on the execution date on or after November 1, 2020, transactions reflecting the above-mentioned status will be rejected.
6. A new Status (Pending for OTP confirmation – 21) will be added in Changed Orders for the Day (COD). Participants can use this to update their Back Office.
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