SEBI Offers a Mechanism to Rectify Erroneous Transfers in Demat Accounts

Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/139, Dated 08.08.2023

Earlier, the SEBI vide circular dated May 17, 2023, titled “Master Circular for Stock Brokers” has specified the following:

“35.11 All off-market transfer of securities shall be permitted by the Depositories only by execution of Physical Delivery Instruction Slip (DIS) duly signed by the client himself or by way of electronic DIS. The Depositories shall also put in place a system of obtaining client’s consent through One Time Password (OTP) for such off market transfer of securities from client’s demat account.”

The SEBI has received representations from depositories regarding the challenges faced w.r.t obtaining OTP in case of reversal of erroneous transfers.

Considering the challenges involved and in order to facilitate the reversal of erroneous transfers, 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.

SEBI has now prescribed that depositories shall constitute an internal & joint committee for examining the intra and inter depository erroneous transfers. Such committee shall be headed by a Public Interest Director of Depository and have a minimum of 3 members including the head.

The depositories shall place before the committee all such instances of erroneous transfers pending for reversal. Further, depositories shall provide a facility to the investors & DPs to add and verify beneficiaries before execution of off-market transfers from 01-01-2024 onwards. The circular shall be effective immediately.

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