Depository participants (DPs) which collect upfront yearly or half-yearly account maintenance charges will now have to refund the balance amount if the beneficial owner closes or shifts his/her demat account before the expiry of the period for which the charges have been levied.
At present, DPs collect account maintenance charge (AMC) from beneficial owners towards maintenance of demat accounts for varied periods like monthly, quarterly, half-yearly or annually.
According to the Securities and Exchange Board of India (Sebi), there have been instances where the AMC was collected upfront for the year but on closure/shifting of the account, the AMC for the balance period, for which no service was provided by the DP, was not refunded.
The market regulator, in a circular issued on Thursday, has clarified that DPs need to refund the AMC for the balance period. “It has been decided that in the event of closing or shifting the demat account from one DP to another, the AMC collected up-front on annual/half-yearly basis shall be refunded to the beneficial owners for the balance quarter/s,” the circular said.
“For the above purpose, the year shall begin from the date of opening of the account in quarterly rests,” added the Sebi circular. The new requirements will be applicable to all existing and new accounts held with DPs.
Sebi has also clarified that the new requirements will not be applicable to those who collect quarterly/monthly AMC.
The new norms will come into force with immediate effect.