To rein in incidents of frauds that take place in converting physical shares into demat, Sebi put in place several extra layers of checks and balances. These include a plan to build a master file of all physical shares currently held by investors with the depositories. The markets regulator has asked listed companies to submit data of all shareholders holding physical shares to depositories by December 31.
Media had highlighted how unscrupulous agents were cashing in on unclaimed physical shares by demating them through fraudulent means. Subsequently, Sebi had launched an investigation and then banned transfer of physical shares, except under some specified circumstances, from April 1, 2019.
In its circular, Sebi said the move was aimed at augmenting “the integrity of the system in processing of dematerialisation request in respect of the remaining physical shares”. After depositories receive the data from the companies, they should put in place systems to validate any demat request received after December 31, Sebi said.
“All listed companies or their registrar and transfer agents shall provide data of their members holding shares in physical mode, that is, the name of the shareholders, folio numbers, certificate numbers, distinctive numbers and PAN, etc as on March 31, 2019, to the depositories, latest by December 31, 2019,” the Sebi circular said.
The data would be validated against the demat account holders’ names as available in the records of the depositories. In case there is a mismatch in name on the share certificate and that of the beneficial owner of demat account, the depository system should generate an alert, Sebi said.
In case of such alerts, additional documents, including Aadhaar of the individual, would be sought. And if there is a complete mismatch between the two data, the applicant can approach the issuer company or the RTA for establishing his or her ownership, Sebi said.