Sebi fines 2 cos for failing to dematerialise shares

The market regulator Sebi today penalised two companies-- BTW Industries and GR Magnet-- for delaying dematerialisation of securities for several years.

While it imposed a penalty of Rs 40 lakh on BTW Industries, GR Magnet was fined Rs 12 lakh for failing to dematerialise its securities. Dematerialising securities means keeping them in electronic form.

In the case of BTW, the Sebi said there were 1,860 demat requests pending from the National Securities Depository (NSDL) and Central Depository Services (CDSL), involving over 3.30 lakh shares. These requests have been pending since October 2003. In the case of GR, it said 624 demat requests have been pending from January 2004, involving 3.10 lakh shares of this company.

In both the orders, Sebi cited the violation of Sebi rules pertaining to the Depositories Act.

As per Sebi rules, all securities are to be held in the demat form and if they are not converted to electronic form within a stipulated period by the entities, they are penalised.

"...Incidences of this nature definitely compromise the securities market regulatory framework and to the detriment of investors at large," Sebi said in its orders against these two firms. "Delay and non-attendance of each demat request constitutes a separate violation," it added.

A depository is an organisation that holds securities like shares, debentures, bonds, government securities and mutual funds of individual investors in electronic form at the request of the investors through a registered depository participant. It also provides services related to transactions in securities. At present, there are two depositories registered with the Sebi -- NSDL and CDSL.

To avail the services of a depository, an investor is required to open a beneficial owner account with a depository participant of any of the two depositories.