SEBI Enhances Safeguards For Transfer Of Securities From Beneficial Owner Accounts

The Securities and Exchange Board of India has amended the safeguards that address concerns arising out of the transfer of securities from beneficial owner accounts without the proper authorisation of the concerned investor.

The market regulator has done so to harmonise the classification of inactive or dormant accounts across stock exchanges and depositories, and to strengthen the measures to prevent fraud or misappropriation of inoperative demat accounts.

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

The regulator has said that the depositories shall give more emphasis on investor education, particularly with regard to careful preservation of delivery instruction slip by the beneficial owners.

Further, if the beneficial owner's delivery instruction slip booklet is lost or stolen, the same must be intimated to the depository participant immediately by the beneficial owner in writing. In return, the depository participant shall cancel the unused delivery instruction slip of the said booklet.

In addition, in case a request for issuance of the delivery instruction slip booklet is received in an inactive or a dormant account, the booklet shall be delivered at the registered address of the beneficial owner as per the depository participant records.

The amended safeguards also say that the depository participants shall not issue more than 10 loose delivery instruction slips to one account holder in a financial year and that this loose delivery instruction slip must be issued only if the beneficial owner comes in person and signs the loose instruction slip in the presence of an authorised official.

The amended safeguards are to come into effect from April 1 this year.