Market regulator Sebi today proposed to bring more classes of financial instruments, including insurance policies and fixed deposits, under the ambit of asset categories that can be held in demat or electronic form.

The proposed move is expected to make it simpler to maintain and safe-keep various kinds of financial instruments, as the risks like loss and theft get minimised in demat form, as compared to the physical paper form.

At present, all securities traded in capital markets such as equity shares and mutual funds can be held in demat accounts, maintained by two depositories NSDL and CDSL, which come under Sebi’s jurisdiction.

After its board meeting here, the Sebi said “there have been demands for dematerialisation of assets/records other than securities, such as, warehouse receipts, fixed deposits with banks and corporates, insurance policies, investment products of post office etc.”

To expand the list of asset classes which can be held in demat form, the Sebi said, it has decided to initiate steps that would enable an investor to view the details of his holdings and transactions across all asset classes through a single consolidated statement.

“The board approved proposal to amend the Sebi (Depositories & Participants) Regulations to enable depository to share the necessary information/data with its Strategic Business Unit (SBU) with respect to the assets/instruments held by them for the purpose of generation of consolidated statement,” the Sebi said.

Under Sebi regulations, the depositories are permitted to take up activities assigned by the central government or by a regulator in the financial sector, through the establishment of a Strategic Business Unit (SBU).

In another decision regarding the depositories, the Sebi said its board approved a proposal to amend the existing norms to enable the market regulator and the depositories to take action against issuers found non-compliant with regulations related to timely dematerialisation of shares, maintenance of proper records etc.

These regulations also include issuers’ agreement with the depositories, carrying out reconciliation of share capital, among others.

The Sebi said it has come across instances of non-compliance such as lack of reconciliation of issued or listed capital and actual share capital by the issuer company and its appointed RTA (Registrar and Transfer Agent).

“In order to enable appropriate action by Sebi in such cases (currently possible under the Depositories Act), the board approved proposal to suitably amend the D&P regulations to enable the Sebi to take appropriate action against non-compliant issuers or their agents... and to empower depositories to take appropriate action against such issuer or agent as per their bye-laws,” the release said.

(This article was published on October 6, 2012)
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