Sebi Plans Mandatory Demat of Pre-IPO Holdings of Key Holders
Why in the news
Sebi floated a rule making important stakeholders convert any paper shares to electronic form before an IPO filing.
Key facts
- Covered holders: promoters, directors, senior management, QIBs and regulated entities like stock brokers and NBFCs.
- Timing: before the offer document is filed.
- Sebi will amend existing rules to enforce this.
About dematerialisation
- Paper certificates become electronic records in a Demat account, routed through a Depository Participant (DP).
- Benefits: lower cost, easier trading, transfer and storage, better security.
Significance
- Closes a loophole that let physical shares stay in the listed system.
- Better governance and transparency, and lower risk after listing.
Exam angle
- QIB = qualified institutional buyer; DP links investors to the depository.