SEBI Proposes Relaxation for Transfer of Pre-2019 Securities

Context:

The Securities and Exchange Board of India (SEBI) has proposed amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, aimed at facilitating the transfer and dematerialisation of securities executed before April 1, 2019. This move seeks to provide relief to investors who missed earlier deadlines for regularising such holdings.

Purpose of the Proposal:

• Simplify the demat process for security transactions executed before April 2019.
• Provide one more opportunity for investors to re-lodge transfer deeds for physical securities.
• Address hurdles caused by rejected transfer deeds, corporate dissolutions, non-cooperative transferors, or misdirected submissions.

Background:

• SEBI discontinued transfer of physical securities from April 1, 2019, to encourage full dematerialisation.
• Despite this, some investors were unable to regularise holdings, creating persistent operational challenges.

Proposed Mechanism:

• Temporary relaxation under Regulation 40(1) of LODR for a specific period (sunset clause to be notified).
• Transfers to be permitted after due diligence by registrars, transfer agents (RTAs), and listed entities.
• Securities will be directly credited into demat accounts upon successful registration.

Policy Implications:

• Provides investor relief and reduces bottlenecks in demat conversion.
• Aligns with SEBI’s broader goal of full dematerialisation while allowing genuine cases to be regularised.
• Helps improve corporate governance and market efficiency by reducing physical shareholding.