Sebi mulls mandating new securities issuance in demat after stock split

New Delhi: To encourage demat holding of securities, Sebi on Tuesday proposed mandating listed companies to issue securities only in demat form following stock split, consolidation of face value of shares, and merger or demerger.

In case an investor does not have a demat account, the issuer companies will be required to open a separate demat account with a suitable ledger of ownership or suspense escrow account for dealing with such securities, Sebi proposed in its consultation paper.

Dematerialisation of securities has several benefits, including reduction of frauds and forgery, elimination of loss and damage of securities, faster and more efficient transfers, improved transparency and regulatory oversight, mitigation of legal disputes, cost reduction of investors and

companies, etc.

Considering this, while Sebi is encouraging holding of securities in demat form by the investors, at present a few investors hold securities in physical form.

Although it is legally permissible to hold securities in physical form, an investor can sell or transfer such securities only after dematerialising these securities.