CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/139 August 08, 2023
To,
All recognized Depositories
All Depository Participants through recognized Depositories
Madam / Sir,
Sub: Facility to remedy erroneous transfers in demat accounts
1. SEBI, vide circular no. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/71 dated May
17, 2023, titled “Master Circular for Stock Brokers” has, inter alia, specified the
following:
“35.11 All off-market transfer of securities shall be permitted by the Depositories
only by execution of Physical Delivery Instruction Slip (DIS) duly signed
by the client himself or by way of electronic DIS. The Depositories shall
also put in place a system of obtaining client’s consent through One Time
Password (OTP) for such off market transfer of securities from client’s
demat account.”
2. SEBI has received representations from depositories regarding the challenges
being faced with regard to obtaining OTP in case of reversal of erroneous transfers
in the demat accounts, and was requested to address the issue.
3. Considering the challenges involved and in order to facilitate the reversal of
erroneous transfers, it is decided that a well-balanced and operational mechanism
for exemption from OTP may be provided for reversal of such erroneous transfers
in the demat accounts.
4. For this purpose, Depositories shall constitute an internal and a joint committee for
examining the intra-depository and inter-depository erroneous transfers
respectively. Such committee shall be headed by a Public Interest Director of
Page 1 of 3
Depository and have a minimum of 3 members including the head. The
depositories shall place before the committee all such instances of erroneous
transfers pending for reversal.
5. The committee shall examine such erroneous transfers and provide an opportunity
of hearing to both the parties in the interest of principles of natural justice. The
committee shall, based on the documentary evidence and the hearing, take a
decision on the basis of reasons to be recorded in writing.
6. Depositories shall subsequently act based on the decision of the committee and
shall send an email to the registered email ID of the transferee, informing about the
decision of the committee.
7. Para 35.11 of SEBI circular no. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/71
dated May 17, 2023 titled “Master Circular for Stock Brokers” stands supplemented
to the extent of provisions of this circular.
8. Further, to minimize such erroneous transfers, Depositories shall provide a facility
for the investors and DPs to add and verify the beneficiaries before execution of
off-market transfers including inter-depository transfers.
9. Depositories shall put in place appropriate systems and procedures to ensure
compliance with the provisions of this circular and disseminate the SoP on their
websites and bring to the notice of their participants.
10. The provisions (excluding para 8) of this circular shall come into force with
immediate effect. The provisions at para 8 of this circular shall come into force with
effect from January 01, 2024.
11. Depositories are directed to:
11.1. make necessary amendments to the relevant bye-laws, rules and regulations
for the implementation of the above decision;
11.2. communicate to SEBI the status of implementation in their monthly
development reports;
Page 2 of 3
12. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 and Section 19 of the
Depositories Act, 1996 to protect the interests of investors in securities and to
promote the development of, and to regulate the securities markets.
Yours faithfully
Aradhana Verma
General Manager
Tel. No: 022 26449633
aradhanad@sebi.gov.in
Page 3 of 3