You can just watch your physical shares soar on Sensex, but can’t sell them from Dec 5

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Published: October 3, 2018 4:41:20 PM

You will not be able to lodge your physical shares with the company or its RTA for further transfer, if you continue to hold shares and other types of securities of listed companies in physical form.

share markets, shares, Sensex, Nifty, BSE, NSE, physical share, demat account, dematerialisation, electronic format, SebiThe Sebi amendment is aimed at curbing fraud and manipulation risk in physical transfer of securities by unscrupulous persons.

If you are holding your shares still in physical form, it’s time to wake up. From the second week of December, you may just got stranded and may only watch your shares hit new highs on the Sensex and Nifty, but will not be able to grab the opportunity of making gains by disposing of the scrips.

Market regulator Stocks and Exchange Board of India (Sebi) on June 8, 2018 amended relevant provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to disallow listed companies from accepting request for transfer of securities which are held in physical form with effect from December 5, 2018.

So, you will not be able to lodge your physical shares with the company or its Registrar and Transfer Agents (RTA) for further transfer, if you continue to hold shares and other types of securities of listed companies in physical form even after the cutoff date unless you compulsorily convert them to demat form.

The shareholders who continue to hold shares and other types of securities of listed companies in physical form even after this date, will not be able to lodge the shares with company or its RTA for further transfer. They will need to convert them to demat form compulsorily if they wish to effect any transfer.

Not only to improve ease, convenience and safety of transactions for investors, the Sebi amendment is aimed at curbing fraud and manipulation risk in physical transfer of securities by unscrupulous persons.

However, the new rule will not prevent transfer of title of shares by way of inheritance or succession and interchanging of the order of name of shareholders as the market regulator has made it clear that the requests for transmission and transposition of securities in physical form will be accepted by the listed companies and their RTAs.

So, for orthodox investors, who believe in gains through dividends and bonus issues and prefer to hold on their investments for generations, the Sebi notification will only make them feel more secure as the physical shares become illiquid. But for other investors, time is running out. As the process of dematerialisation takes some time, they may lose opportunities if they delay the process further.

How to dematerialise your physical shares:

  1. To dematerialise your physical shares, a demat account has to be opened first with a depository participant (DP), who acts like a share broker. The demat account along with a transaction account will be linked with your bank account.
  2. You have to fill a Dematerialisation Requisition Form (DRF) after the demat account is opened to convert your physical shares into the electronic format.
  3. The physical shares will be converted into demat form after physical verification of the certificates are done by the issuing company or its RTA. As per the Sebi guidelines, the conversion should not take more than 21 days.
  4. Once the shares enter your demat account after getting converted into electronic format, you will be able to sell or transfer them during market hours.

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