Sebi proposes easing transfer, demat norms for pre-2019 securities

Sebi proposes fresh window for transfer of pre-2019 physical securities and plans to scrap the Letter of Confirmation system to simplify demat procedures for investors

The Securities and Exchange Board of India (Sebi) has proposed amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015 to facilitate the transfer and dematerialisation of securities executed before April 1, 2019. The move is aimed at providing relief to investors who missed earlier deadlines to regularise such holdings and to simplify the demat process for all security transactions.

 

In a consultation paper, Sebi said it plans to allow one more opportunity for investors to re-lodge transfer deeds for physical securities executed before April 1, 2019. The regulator’s proposal follows recommendations from a panel comprising registrars and transfer agents (RTAs), listed companies and legal experts, which reviewed persistent transfer and demat hurdles faced by investors. 

Sebi had earlier discontinued the transfer of securities in physical form from April 2019 to encourage dematerialisation. However, several investors were left unable to transfer or dematerialise their holdings due to rejected transfer deeds, corporate dissolutions, non-cooperative transferors, or misdirected submissions. The temporary relaxation will cover such genuine cases.

 

To operationalise this, Sebi has proposed an exception in Regulation 40(1) of the LODR Regulations, to be applicable for a specific period to be notified later. Transfers will be permitted only after due diligence by RTAs and listed entities, and the securities will be credited directly into demat accounts upon registration. The exception will include a sunset clause to preserve Sebi’s broader goal of full dematerialisation.

 

Separately, Sebi has proposed scrapping the current “Letter of Confirmation” (LoC) system for dematerialisation, which it said causes duplication of effort and delays for investors. Instead, it intends to enable RTAs and listed companies to credit securities directly into investors’ demat accounts after due verification, thus removing the need for LoC issuance, expiry tracking, and the maintenance of suspense demat accounts.

 

Investors submitting service requests such as duplicate certificate issuance, transmission or transposition will be required to provide their demat account details upfront to facilitate direct electronic credit. The regulator said this system would simplify the process and reduce turnaround time.