Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 – Key Highlights
The Securities Exchange Board of India (“SEBI”) has notified the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 (“New Regulation”) on 3rd October, 2018 and it gains immediate effect. The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 (“Old Regulation”) stands repealed upon commencement of the New Regulation.
The key highlights of the New Regulation are as follows;
- Except and otherwise specified in the New Regulation or any by laws, the depositories, participants, issuers, issuer’s agent to have more rights and obligations as per the agreements entered by them.
- Depositories to declare specific type of securities eligible for dematerialization.
- Issuers to enter into agreements with depositories to enable the investors to dematerialize securities held by them.
- In such cases, where the issuer has appointed a registrar to the issue or share transfer agent, the New Regulations mandates the depository, registrar to the issue or share transfer agent and the issuer to execute a tripartite agreement with respect to securities declared by the depository as eligible for dematerialization.
- Depositories to have systems or producers to coordinate with issuer or its’ agents or participant for reconciling the records of ownership of securities on daily basis.
- There shall be continuous communication between the depositories, participants, issuers, issuers’ agents.
- A mechanism to be developed by depositories for protection of interest of the investors.
- The interests of the beneficial owners against risks are to be protected by the depositories by applying adequate measures or through insurance.
- There shall be cooperation between the depositories and the beneficial owners, issuers, issuer’s agent, custodians of securities, clearing organizations for having an effective, prompt and accurate clearance and settlement of securities.
- Participants to execute an agreement with beneficial owners as per the specified manner by the depositories before acting as a participant on his behalf.
- Every beneficial owner is entitled to have statement of accounts from the participants as per the specified format as may be agreed between them.
- Participants to submit periodic returns to the SEBI and their respective depositories as per the format specified by SEBI.
- Participants to ensure safety and security of records and data submitted to them by the investors, issuers etc.
- Issuers whose securities are eligible for dematerialization to have agreements with the depositories.
- Depositories to establish an Investor Protection Fund.
- The procedure of dematerialization of eligible securities has been established under the New Regulation.
- Issuers or its agents to reconcile the records of dematerialized shares.
- Every issuer is mandated to submit and audit report on quarterly basis starting from 30th September, 2003 to concerned stock exchange audited by a qualified Chartered Accountant or a practicing Company Secretary.
- Issuers whose securities are eligible for dematerialization shall give information to the depository about book closure, record dates, dates for payment of interest or dividend, dates for annual general meeting and other meetings, dates for redemption of debentures, dates for conversion of debentures and warrants, call money dates and such other information at the time and in the manner as may be specified by the depository in its bye-laws or agreement.
- It has been prescribed the procedure for creating pledge or hypothecation by a beneficial owner.
- SEBI has the power to appoint an auditor to inspect or investigate, into the books of account, records, documents, infrastructures, systems and procedures or affairs of a depository, a participant, a beneficial owner, an issuer or its agent.
- SEBI has the absolute authority to take any action against any issuer or its agent, whoever contravenes any provisions of the New Regulation.