Issues concerning dematerialization of your holdings

[Wenni Stupar]

Before the advent of online stock option trading, traders and investors in stock markets had to deal with many problems. Shares lost in transit were a difficult problem to deal with in earlier times. In the event of shares getting lost in transit, the depository participants will be required to give the necessary indemnity to the R & T (Registrar & Transfer) agent of the company, if required, on behalf of the customer. This is because the shares got defaced when submitting the dematerialization request form (DRF). The customer should not be held liable for any additional cost incurred. However, in this respect the regulatory authority has not issued any specific guidelines to be followed.

Consider the situation in which the signature on the DRF differs with those available with the company or their R & T agent’s records. In such a situation, the investor can be asked to provide additional documents to confirm that the certificates belong to the persons that have deposited them with the depository participants. Normally, the attestation of the bank should be adequate. The company or its R & T agent should retain the share certificates and not return it to the depository participant.

Now, let us consider the issues related to transmission of information. The DPM (depository participant’s module) is used for transmission of the details of securities received for dematerialization. It forwards the request to the issuer/R & T agent through a network and informs the regulatory authority's depository module (DM) system. The system generates a dematerialization request number (DRN) which is recorded in the dematerialization request form.

Depository module of the regulatory authority will automatically authorize the credit in the investor’s account as soon as it receives the acceptance request for dematerialization from the issuer/R & T agent. The depository participant is required to inform the investor as soon as the investor’s account has been credited. However, in the virtual trading model, automatic messages are generated.