Changes depositories norms: Sebi

The Securities and Exchange Board of India is proposing to make the depositories responsible for securities issued in excess of listed capital and pre-listing gray market securities during IPOs.

In a discussion paper on this, Sebi says the proposed change in regulation suggests that one of the preventive steps could be to put certain responsibilities on the depositories to ensure that the securities are not dematted in excess of listed or issued capital.

Sebi said, "Where an issuer allots further securities in demat form of a stock which is already listed on any recognised stock exchange, the issuer and the designated stock exchange shall confirm to the depositories that listing and trading permissions have been granted for further securities by all stock exchanges in which the existing securities of the same class are listed."

Sebi says, provided that these securities are listed on recognised stock exchanges that have nationwide trading terminals, among others, it would be sufficient for the issuer and the designated stock exchange to provide this confirmation.

For IPOs, the issuing company and stock exchange should confirm to the depositories that listing and trading permissions have been granted by all stock exchanges to which listing applications were made.

The depository will then block the securities allotted in demat form to any person in their demat account until these confirmations are received from the issuer and the designated stock exchange.

Where any allotment of securities in an IPO or any allotment of further securities made in demat form is subject to lock-in period, the depository could block such securities in the demat account of the person to whom the allotment was made, till the lock-in period is over.

If upon examination the participant finds that the securities pertaining to that certificate have already been dematerialised or that they have not been listed on the stock exchanges, it should report this to the issuer and to the depository and return the certificate to the beneficial owner after putting an indelible stamp on its face mentioning "not eligible for dematerialisation", Sebi said.