SEBI Eyes Full Dematerialisation of Shares in a Big Reform Push

Published 15-01-2025, 11:47 am
© Reuters.

The Securities and Exchange Board of India (SEBI) is ramping up its efforts to modernize the securities market by proposing the mandatory issuance of shares in dematerialised form for events like share splits, consolidations, and corporate restructuring. This move is aimed at leveraging the numerous benefits of dematerialised shares while phasing out physical share certificates, which are prone to risks like loss, theft, damage, and fraud.

Why Dematerialisation?

Holding shares in electronic form offers a host of advantages:

- Fraud Prevention: Eliminates risks tied to forgery and counterfeit certificates.

- Efficiency: Ensures quicker transfers and better transparency.

- Cost Savings: Reduces administrative and legal costs for both companies and investors.

- Enhanced Oversight: Enables regulators to maintain a clearer and more effective monitoring system.

SEBI has long championed the transition to demat accounts. However, many investors still cling to physical share certificates. To address this, the regulator proposes that companies establish separate demat or escrow accounts for those without demat accounts during share splits, consolidations, or restructurings.

To bolster its push, SEBI has suggested amending the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. These amendments would mandate the issuance of shares exclusively in demat form for events like sub-divisions, face-value splits, and corporate restructuring schemes.

Additionally, SEBI plans to simplify processes for signature verification by removing the requirement to maintain proof of delivery for notifications related to minor or significant signature discrepancies. This step aims to streamline the handling of such discrepancies and improve efficiency.

SEBI has issued a consultation paper on these proposals, inviting public feedback until February 4, 2025. The initiative reflects SEBI’s unwavering commitment to modernizing securities handling, ensuring investor protection, and eliminating the creation of new physical certificates entirely.

This proposed shift aligns with SEBI’s broader strategy to enhance regulatory supervision and streamline market operations. A complete transition to dematerialisation is expected to benefit both investors and companies by reducing operational costs, improving transparency, and ensuring better compliance.

SEBI’s push for a fully dematerialised system represents a significant step toward building a more efficient and secure capital market ecosystem, where risks tied to physical certificates become a thing of the past.

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