Sebi moots easing of demat charges

Securities and Exchange Board of India (Sebi) has suggested that small investors should be charged fees only on the basis of the deal value with respect to demat transactions.

Further, charges such as account maintenance should not be levied on small investors at all by DPs, according to a concept paper by Sebi.

The paper has suggested that since companies have derived the largest part of the benefits accrued on account of dematerialisation, "it is proposed that companies may be advised to pay an one-time fee to the depository at 0.1 per cent of market cap of that particular company on the existing lines or on the basis of number of post issue shares."

In case of new companies it may be worked out on the basis of the post-issue paid-up capital or the number of post-issue shares. This can be implemented in a phases.

In order to implement the recommendation of levying fees from the companies, Sebi may have to amend listing agreement of exchanges and other relevant legal provisions.

A small investor has been defined as one who buys or sells securities worth Rs 50,000 or less on any business day.

The other alternative of defining small investor could be based on the maximum number of transactions carried out in a financial year that is 60 transactions in a year, according to the paper.

For charges owing to account closure, the paper says, "as long as the investor is under demat environment and desires to shift his account from one DP to another DP (owing to some perceived advantages) the investor may be permitted to close his account with the existing depository participant without any transaction charges or other incidental charges, as being levied currently."

Account closure charges may be collected if the investor is opting out of the demat facility. Alternately, depositories can consider giving one-time exemption from account closing fee for switch over from one entity to other.

The discussion paper has also spelt out the need to rationalise the structure of charges levied by various depository participants.

"DPs charge under various heads and there is no uniformity across the DPs. Sometimes, it appears there are excessive charges on certain heads. Therefore, there is a need to rationalise the structure as much as possible," the paper has pointed out.

While making its recommendations, Sebi has made the following assumptions - securities market as a whole has benefited by the dematerialisation, small investors have been charged highly, companies, as a constituent, derived maximum pecuniary benefit, companies are expected to pay one-time charges, folio-size and market capitalization do not always have direct relationship.