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SEBI Issues Norms to Demat Re-lodged Shares

13 Sep 2023

With a free Demat account, as an investor, you can convert physical shares to electronic shares. This makes trading shares much more convenient. Ensuing the re-lodged share transfer request, the SEBI (Securities and Exchange Board of India) implemented a new operational guideline to convert physical shares to Demat forms. Let us dive deeper into the new norms issued on how to convert physical shares to Demat in 2021. 

  • What is SEBI? 

SEBI is known as the regulatory body that was formed in April 1992. Its primary duties are to regulate the Indian securities market and capital market. These regulations are monitored daily. It also protects the interest of investors in the capital and securities market by preventing suspicious practices in the Indian capital market.

  • Norms Issued Against Demat Re-lodged Share Transfer Request:

SEBI put out a circular on 7th September 2020 stating that 31st March 2021 was going to be the final date for the share transfer request and to convert physical shares to Demat in 2021. Another circular was issued on 2nd December 2020, specifying the operational regulations to convert physical shares to Demat. The norms issued were:

  • As clearly stated, the proceeding of any re-lodged share transfer request will be succeeded by the RTA (Registrar and Share Transfer Agents) holding on to the physical shares. Then, you will be informed regarding the implementation of conversion through a letter of confirmation.
  • You need to submit a Demat request to the Depository Participant (DP)within 90 days of receiving the confirmation letter. Additionally, a reminder letter would be sent to you by the RTA after 60 days of issuance of the letter of confirmation. It was also specifically declared that the letters would be sent via speed or registered postal services. Furthermore, an email also can be sent along with a letter that is signed digitally, and it must contain details regarding your folio, endorsement, and shares.
  • Based on the provided details, the Depository Participant (DP) will come to a decision whether to proceed with a Demat request or not.
  • If after 90 days after the letter of confirmation was issued, no Demat request is sent by you; the physical shares would be moved to the company's suspense escrow Demat account. The depository accounts for unclaimed shares of listed companies are known as suspense escrow Demat accounts.

To Wrap Up:

The regular monitoring of India's capital market by SEBI has expedited several improvements regarding the roles of the Demat accounts. The newly issued norms to convert physical shares to Demat in 2021 are crucial since they reinforce the safety of net-based trading of shares. Furthermore, it is convenient for the Indian government to trace financial instruments in case of any misconduct. To start trading safely, open a free Demat account at Motilal Oswal.

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account 


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