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Why SEBI should extend Dec 5th timeline on demat of physical shares?

30, Nov 2018
Why SEBI should extend Dec 5th timeline on demat of physical shares?

December 5th, 2018 deadline to covert physical shares into demat is just giving sleepless nights to lakhs of investors in the country.

On 8th June 2018, SEBI has notified vide Notification No. SEBI/LAD-NRO/GN/2018/24  by issuing SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) (FOURTH AMENDMENT) REGULATIONS, 2018 that except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository. In other words, there will not be any transfer of physical share after 5th December 2018.

 

According to this amendment, the requests for effecting the transfer of listed securities shall not be processed after 5th December 2018 unless the securities are held in the dematerialized form with a depository. Therefore, for effecting any transfer, the securities shall mandatorily require to be in demat form.

 

Then came November 6th , 2018 circular of SEBI

 

A welcome move by SEBI came when the country was in the festive mode of Diwali. A perfect Diwali bonanza for Investor who is finding it difficult due to cumbersome and ambiguous process to transfer their Old physical shares

 

SEBI received lot of representations, highlighting difficulties faced by transferees in providing documents for effecting transfer of securities and the documents sought used to vary across RTAs (Registrar & Transfer Agent) for cases relating to transfer of old shares in physical form where PAN card of transferor not available, name mismatch, signature mismatch etc.

 

Vide circular SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 dated 6th November 2018, SEBI laid down Standardized Norms for transfer of Securities in physical mode

 

SEBI 6th November-2018 circular gives reasons to Cheer but haunted by 5th December 2018 deadline: Reason for extending December 5th deadline

 

A welcome move by SEBI vide 6th November 2018 circular to standardized the norms to transfer old physical share certificates to the rightful owner would not serve any purpose if December 5th deadline by SEBI is not being extended.

 

After SEBI’s 6th November circular, all listed companies, RTA and even SEBI themselves were caught up with continuous query flow from end number of an investor seeking clarification about the circular.  On the other side if SEBI remain adhered to December 5th deadline then it would just defeat the purpose of having November 6th circular which is considered to be most investor-friendly circular as it would be simplifying the process of ownership transfer of physical shares where the transferor is not traceable or having PAN or signature mismatch issues.

 

There was a recent article in the national leading newspaper The economic times with a caption Physical shares turn 'illiquid' after 5 Dec; 4% of Sensex scrips still in non-demat form. This is just tip of the iceberg. There are more than 5000 listed companies in India where crores of rupees of physical shares are just lying.

 

Can holder continue to hold shares in Physical form? 

 

Yes, the holder can continue to hold the shares in physical form but one cannot transfer the same in physical form.

 

Hoping to have much sought after extension from SEBI thereby extending December 5th deadline.

Author,

Vikash Jain

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