MANU/SSMD/0009/2024

Ministry : Securities and Exchange Board of India

Department/Board : Market Regulation Department

Circular No. : SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/18

Date : 20.03.2024

To

All Depositories

Dear Sir/ Madam,

Safeguards to address the concerns of the investors on transfer of securities in dematerialized mode

1. Para 1.12 of SEBI Master circular for Depositories dated October 06, 2023 prescribed guidelines to address the concerns arising out of transfer of securities from the Beneficial Owner (BO) Accounts without proper authorization by the concerned investor.

2. To harmonize the classification of inactive/dormant accounts across Stock Exchanges & Depositories and to strengthen the measures to prevent fraud / misappropriation for inoperative demat accounts, based on consultation with depositories and the recommendations of SMAC, it has been decided to amend Para 1.12 as under:

1.12. Safeguards to address the concerns of the investors on transfer of securities in dematerialized mode

Following safeguards shall be put in place to address the concerns of the investors arising out of transfer of securities from the BO Accounts:

1.12.1. The depositories shall give more emphasis on investor education particularly with regard to careful preservation of Delivery Instruction Slip (DIS) by the BOs. The Depositories may advise the BOs not to leave "blank or signed" DIS with the Depository Participants (DPs) or any other person/entity.

1.12.2. The DPs shall not accept pre-signed DIS with blank columns from the BO(s).

1.12.3. If the DIS booklet is lost / stolen / not traceable by the BO, the same must be intimated to the DP immediately by the BO in writing. On receipt of such intimation, the DP shall cancel the unused DIS of the said booklet.

1.12.4. The DP shall also ensure that a new DIS booklet is issued only on the strength of the DIS instruction request slip (contained in the previous booklet) duly complete in all respects, unless the request for fresh booklet is due to loss, etc., as referred to in Para 1.12.3 above.

Further, in case the request for issuance of the DIS booklet is received in an inactive/dormant account, the DIS booklet shall be delivered at the registered address of the BO as per the DP records. This shall help ensure the genuineness of the BO's request for issuance of DIS. Such issuance of DIS shall be authorized by the Compliance Officer or any other designated senior official of the DP.

Explanation:

1. An inactive/dormant account refers to an account where no transaction has taken place for a continuous period of 12 months.

2. Further, a credit in the demat account through purchase of securities and voluntary corporate action (such as subscribing to rights issues/ systematic investment plans (SIPs) of mutual funds, etc.) may be considered as a transaction for assessing the dormancy. However, any credit due to involuntary corporate action (such as bonus, split, etc.) may not be considered as transaction for assessing the dormancy.

1.12.5. The DPs shall not issue more than 10 loose DIS to one account holder in a financial year (April to March). The loose DIS can be issued only if the BO(s) come in person and sign the loose DIS in the presence of an authorised DP official.

1.12.6. The DPs shall put in place appropriate checks and balances with regard to the verification of signatures ........