Panel to decide reversal of erroneous transfers in demat accounts

The Securities and Exchange Board of India (Sebi) has established a new mechanism for the reversal of erroneous transfers in dematerialised (demat) accounts.

The regulator has instructed depositories NSDL and CDSL to form a joint committee of at least three members, including its head, who must be one of their public interest directors (PIDs). The depositories will need to present to the committee all such instances of erroneous transfers awaiting reversal.

"The committee shall examine such erroneous transfers and provide an opportunity of hearing to both the parties in the interest of the principles of natural justice. The committee shall, based on the documentary evidence and the hearing, take a decision on the basis of reasons to be recorded in writing," Sebi has stated in a circular.

 

Currently, the client, whose demat account is erroneously credited, must provide a one-time password (OTP) to reverse the transaction via an off-market transfer.

Depositories approached Sebi, highlighting the challenges faced concerning obtaining OTP for such trade reversal. "Considering the challenges involved and in order to facilitate the reversal of erroneous transfers, it is decided that a well-balanced and operational mechanism for exemption from OTP may be provided for reversal of such erroneous transfers in the demat accounts," Sebi has said.

Furthermore, to minimise erroneous transfers, the market regulator has directed depositories to provide a facility for investors and brokers to add and verify the beneficiaries before the execution of off-market transfers, including inter-depository transfers. Sebi has announced that the new mechanism will come into force from January 1, 2024.


‘Implementation standard’ pilot takes off

Sebi said that rumour verification requirements, regulations 30 and 30A of disclosure regul­ations, ESG (environmental, social, and governance) assurance and structured digital database under insider trading regulations have emerged priority areas for its pilot around formulating standards for impleme-ntation. “Associations have indicated a timeline of three to four months to design the standards for effective implementation of requirements in above areas,” it said.