The Securities and Exchange Board of India (SEBI) has introduced new safeguards, including recorded phone calls, to address the potential misuse of Delivery Instruction Slip (DIS) in case of dormant or inactive Demat accounts.
SEBI considers an account as dormant or inactive if has not done any transaction for a continuous period of 12 months.
A credit in a Demat account through purchase of securities and voluntary corporate action such as subscribing to rights issues/SIPs of mutual funds etc. are considered as a transaction for assessing the dormancy. However, any credit due to involuntary corporate action such as bonus, split etc. may not be considered as transaction for assessing the dormancy.
This article looks at the new safeguards announced by SEBI. But first, quickly understand what is DIS and why it is important.
What is a Delivery Instruction Slip (DIS)?
If you are trader or stock market investor, you must have come across Delivery Instruction Slip or DIS Slip. DIS works like a cheque for Demat accounts. It helps in facilitating and authorising the sale or transfer of shares from one account to another.
However, there is a possibility of misuse of DIS in case of dormant accounts if not handled properly. For instance, if you put a signature on DIS slip of your dormant account and lose it, the person finding it can transfer all your shares to his/her name. There is also a possibility that someone might forge a signature on DIS.
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New safeguards
The markets regulator has tried to end the above worries for dormant accounts with new safeguards announced in a circular dated March 20, 2024.
The following are key safeguards mentioned in SEBI’s circular:
The depositories shall give more emphasis on investor education particularly with regard to careful preservation of Delivery Instruction Slip (DIS) by the Beneficial Owners (BOs).
The Depositories may advise the BOs not to leave “blank or signed” DIS with the Depository Participants (DPs) or any other person/entity.
The DPs shall not accept pre-signed DIS with blank columns from the BOs
If the DIS booklet is lost/stolen/not traceable by the BO, the same must be intimated to the DP immediately by the BO in writing.
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On receipt of such intimation, the DP shall cancel the unused DIS of the said booklet.
The DPs shall not issue more than 10 loose DIS to one account holder in a financial year (APril to March). Loose DIS can be issued only if the BO(s) come in person and sign the loose DIS in the presence of an authorised DP official.
The DPs shall mandatorily verify with a BO before acting upon the DIS in case of an inactive/dormant account, whenever any security in such account is transferred at a time. “Such verification by DPs shall require a recorded phone call on registered number of BO by the authorised official of the DP and shall be additionally authorised by the Compliance officer or any other designation senior official of the DP.
The new safeguards introduced by SEBI will come into effect from April 1.
