Sebi provides facility to remedy erroneous transfers in demat accounts
The depositories also put in place a system of obtaining the client's consent through OTP for such off-market transfer of securities from the client's demat account
New Delhi: Capital markets regulator Sebi on Tuesday decided to provide a facility for exemption from one-time password (OTP) to facilitate the reversal of erroneous transfers of securities in demat accounts.
Under the rule, all off-market transfer of securities will be permitted by the depositories only by the execution of a physical Delivery Instruction Slip (DIS) duly signed by the client himself/herself or by way of electronic DIS.
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The depositories also put in place a system of obtaining the client’s consent through OTP for such off-market transfer of securities from the client’s demat account.
The facility came after Sebi received representations from depositories regarding the challenges being faced with regard to obtaining OTP in case of reversal of erroneous transfers in the demat accounts, and was requested to address the issue.
“It is decided that a well-balanced and operational mechanism for exemption from OTP may be provided for reversal of such erroneous transfers in the demat accounts,” the Securities and Exchange Board of India (Sebi) said in a circular.
For this purpose, depositories will constitute an internal and joint committees for examining the intra-depository and inter-depository erroneous transfers, respectively. Such a committee will be headed by a Public Interest Director of the depository and have a minimum of three members, including the head.
The depositories will place before the committee all such instances of erroneous transfers pending reversal.
The committee will examine such erroneous transfers and provide an opportunity for hearing to both parties in the interest of principles of natural justice.
Based on the documentary evidence and the hearing, the committee will take a decision on the basis of reasons to be recorded in writing.
Depositories will subsequently act based on the decision of the committee and shall send an e-mail to the registered e-mail ID of the transferee, informing about the decision of the committee.
Further, to minimise such erroneous transfers, depositories will provide a facility for the investors and depository participants to add and verify the beneficiaries before the execution of off-market transfers, including inter-depository transfers.
Sebi has asked depositories to put in place appropriate systems and procedures to ensure compliance with the framework and disseminate the standard operating procedure on their websites and bring it to the notice of their participants.
The framework will come into force with immediate effect, while those pertaining to verification of the beneficiaries before execution of off-market transfers would come into effect from January 1, 2024.
