Introduction
The main purpose of a demat or dematerialised account is to hold the shares/securities for an investor to trade them electronically. With the Demat account opening process, the trading process has become quite easy for investors when compared to the older and more complex paper system.
However, if an investor still holds physical certificates for their shares, they need to be dematerialized before they can be sold as per the SEBI guidelines.
The Conversion Process
To convert physical shares to dematerialized ones, a small process needs to be followed.
- A Demat request form or DRF needs to be submitted
- The physical copies of your share certificates need to be submitted with it
- Both the form and the copies of the share certificates need to be submitted to your depository participant or DP
- A first-level check is done by the DP to make sure the form is filed correctly.
- Once this process is completed successfully, the DRF is sent to the registrar of the company
- Other important documents that help with the dematerialization process are also attached to the DRF form.
Reasons For Declining A Demat Request Form
Though this is a simple process, there are certain conditions under which an investor’s DRF form might get rejected.
- If The Depository Participant Rejects The Drf
The DP or depository participant checks all the technical details in the DRF before accepting it for further processing. Investors need to remember that they need to fill out a fresh DRF for every physical share certificate that they hold.
Here are some of the reasons the DP can reject a DRF:
Reason: In case the names on the certificates and the DRF do not match. If there is a name or initial issue, investors can provide a legal affidavit to the DP. For example, the share certificate might have X as the first holder and Y as the second holder. However, in the DP account, this can be reversed.
Solution: Under such a circumstance, it is always better to open a new Demat account that matches the format of the share certificate.
Reason: If the number of shares in the certificate does not match the number on the DRF
Or
If the number of shares written in words differs from the number of shares written in figures.
Solution: It is best to fill out a fresh DRF correcting the mistakes made in the previous one, making sure that everything matches the share certificates.
Once all these issues have been taken care of and the DRF has been accepted by the DP for further processing, the investor is provided with a DRN or demat request number. The investor must save this number for follow-ups and filing complaints.
- If the registrar rejects the DRF
Once everything has worked out from the DP’s end, the DRF is then sent to the registrar of the company, to be verified. There are a few reasons that the registrar could reject the DRF.
Reason: If the shares in the DRF are more than the free holding shares in the investor’s name according to the registrar’s records.
Solution: The investor would then have to send a modified DRF directly to the registrar with the reduced number of shares.
Reason: If the registrar finds that the share certificates sent across are fake or duplicate.
Solution: The process to rectify this is complex. In this case, the investor will have to get in touch with the trader who sold the shares to them and get the certificates rectified.
Reason: In case of a technical mismatch in name between the master list present with the registrar and the DRF submitted.
Solution: The investor, in such a case, needs to explain the reason for the difference in the name, and if asked to, a fresh DRF needs to be sent across.
Reason: Mismatch in the signature between the DRF and the master with the registrar.
Solution: (a) If an investor did not sign the DRF properly, they would have to rectify this mistake and submit the DRF again.
(b) If the investor’s signature has changed over time, they would need to sign in front of the magistrate and also submit a self-attested affidavit to the registrar.
Reason: If a stop has been issued on the certificate due to a court order etc.
Solution: These issues need to be sorted out by the investor and the proof for the same to be submitted to the registrar.
Conclusion
Though the Demat account opening process is simple, especially if you have decided to pick the best trading platform to be your stockbroker, the DRF rejection can be a setback for investors. The common causes for declining a DRF are technical issues that can be rectified easily. This is why investors must double-check all the details they have filled in on the DRF before submitting it.
