SEBI plan for mandatory demat at transfer stage

MUMBAI, AUG 16: The Securities and Exchange Board of India SEBI has announced a series of steps to speed up and smoothen the dematerial...

MUMBAI, AUG 16: The Securities and Exchange Board of India SEBI has announced a series of steps to speed up and smoothen the dematerialisation demat process. As part of this, the market regulator has planned to make it mandatory for dematerialisation at the transfer stage in order to cut delays. However, a final decision will be taken by the SEBI board after taking into account the risks involved in such a move.

Currently, shares come back to the investor after transfer and the process of demat begins all over again leading to inordinate delays. SEBI is now considering the possibility of transfer and demat, which will help cut down delay. This facility is offered by nine companies and 8220;SEBI plans to make it mandatory for all the 104 scrips8221;.

Talking to journalists after a marathon meeting with depository participants DPs and registrars today, SEBI executive director Pratip Kar said that the demat backlog as on July 27 was cleared by August 10. A number of crucial decisions were taken at the meeting to iron out the difficulties involved in dematerialisation and the procedural delays. The exposure limit for broker DPs is expected to be increased from 35 times their networth to 100 times their networth. 8220;With DPs inundated with demat requests, it was found that this limit was not enough. The higher limit will give them enough leeway in meeting the demat requests.8221; However, a final decision on this will be taken by the SEBI board.

To ensure operational control at the branch offices of DPs, it has been decided that branches with more than 5000 accounts will have to link up with the depositories. 8220;They can be connected through wide-area network or live with NSDL,8221; said Kar. While bank DPs have the advantage of network, many non-bank DPs do not have their branches connected to the depositories.

Registrars have also been asked to give confirmation of inter-depository transfers within two hours of the receipt of requests, failing which it will be automatically transferred. Registrars can reject such cases only if there is a mismatch or there are not enough shares.

To ensure that loss in transit does not add to the woes of the investors, it was decided that DPs would give indemnity to the registrars in such cases. On this basis the registrars will proceed with dematerialisation of such scrips.

Another common problem faced by retail investors is that registrars do not accept partial dematerialisation where a portion of the shares sent for demat are found to be not good. In such cases, the entire lot is returned to the investors. It has been decided that registrars will accept partial demat and send back to investors only those shares not found to be good delivery.

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8220;All DPs have been asked to ensure that they deploy trained personnel at their branch offices before March next. Another procedural problem is the wrong credit arising from errors. Ways and means are being worked out to put in place the process of reversal,8221; said Kar. In order to standardise the demat process, a committee has been set up. This committee will look into standardisation of opening of accounts, demat form, delivery slips, safety features in instruction slips etc.

Kar said that the DPs and registrars have done a commendable job with almost 10 crore shares dematerialised so far. The market regulator had held the second such meeting in the last few weeks following complaints of delays in the demat process. The compulsory demat for 104 scrips hit a road block when it coincided with the seasonal book closures and the surge in the trading volumes on the bourses.