SEBI proposes issue forms via newspapers

The National Securities Depository Ltd (NSDL) has said that it would not levy a rematerialisation charge if an investor wants to convert his electronic holding into a physical one within two months of the issuance of shares. It has also been decided to make it mandatory for the banker to the issue to have a branch at all the locations where a depository participant with the depository functions from.

The draft guidelines would now be made public for comments, and changes, ifany, would be incorporated. The SEBI board had cleared the move to allow fresh issuance of shares only in demat form at its board meeting held nearly four months back. SEBI had then decided to work out the modalities in consultation with registrars and merchant bankers. It is learnt that SEBI chairman DR Mehta is now keen to get the norms in place by April this year.

After several meetings the group finalised the draft norms on Friday. To start with, SEBI feels that the time taken for issue allotment would come down to 21 days from the existing 30 days. This will be brought down to 15 days after a couple of months.

The process will work thus: An investor will pick up the form from a newspaper. This will not only make it easy for the investor but also save lots of money for an issuer by saving him the cost of printing share certificates.

The investor will fill up the form and submit the same, accompanied with a cheque in the name of the issuer (and not the DP), with his DP. Hence, the DP will not in anymanner be involved in handling any cash and the fear of a DP running away with an investor’s money therefore does not arise.

The DP will, in turn, hand over the cheque to the banker to the issue on whose part it will be mandatory to open a branch in every DP location. Most nationalised banks already do have branches in all the 100-plus DP locations.

The allotment request will be electronically forwarded by the DP to NSDL. NSDL will collect all the applications and electronically forward these to the registrar to the company.

Once the allotment process is finalised, the investors who have been allotted the shares would be allotted the shares directly into their accounts. The remaining would be refunded their application amount.

"We expect the process to be completed within 21 days for a start and plan to bring it down to 15 days. This means that the investor’s funds would be locked in for that much lesser period of time," said Sebi legal executive director Dharmishta Raval.

"In a demat environmentthere is no need to have application forms which come with a specific number on them. A form published in the newspaper would be enough. Similarly, it is felt that there is no need for instruments like stock invest, as the time for issue allotment is coming down drastically and hence there is no need for an investor to opt for this route and, moreover, these instruments have been misused as well. The aim is to ensure that the investor deals with just one entity, the DP, for the entire issue allotment process," said NSDL managing director CB Bhave.