MUMBAI, Aug 20: In its meeting scheduled for August 25, the National Securities Depository Ltd (NSDL) board is expected to effect a change in its bye-law to facilitate safer and faster mode of dematerialisation for investors.The onus is now going to be on the company to offer the demat option to the shareholder when he sends his shares for transfer unlike currently where the shareholder has to make a request to the company to dematerialise his shares.
At the same time, NSDL will insist that a company appoints an independent auditor to verify that the certificate is destroyed when it is dematerialised. According to sources, the move which coincides with Wednesday's decision of Sebi to make demat trading mandatory for investors in 10 scrips from January onwards, will enable investors to dematerialise shares at a lower cost than what they are doing currently.
Sebi has cleared the NSDL scheme a few days back after the core group on depository had earlier recommended this as an effective tool to bring down the inconvenience to investors in dematerialising holdings.
Currently, an investor first sends his shares for transfer in his name to the company. Once the shares are transferred in the name of the investor they are sent back to him. This takes about 7-8 days and exposes the investor to the risk of theft in transit.
Once the shares are received by the investor and if he wishes to dematerialise them, they are sent again to the company through the depository participant for dematerialisation. This involves an unnecessary flow of shares from the company to the investor and consumes a minimum of 15 days. The DP passes down the charge of sending the shares to the company to the investor in the form of demat charges.
Instead, what is proposed is that when an investor sends his shares for transfer, the company will in the event of agreeing to transfer the shares, write to the investor offering him the option of dematerialising his shares directly.
If the investor agrees to exercise the option, then the shares would be dematerialised by the company and the shares would be transferred directly to the investor's account in the electronic form. NSDL will insist that an independent auditor ensures that the shares are actually destroyed.
Currently this is done by the DP when the shareholder sends the shares for dematerialisation.
"This would reduce postal risks and eliminate one additional step in the dematerialisation cycle. We have decided to put the onus on a company to inform the investor of the option and not wait for the investor to take the initiative", said a depository source. As per the NSDL bye-laws, a demat request has to be accompanied by the share certificates. This clause makes it mandatory for the investor to first have the shares in his hands before he can lodge them for dematerialisation. Suitable amendment is now sought to be made to ensure that the fresh scheme can be put in place.
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