On May 7th, 2024, the Securities and Exchange Board of India (SEBI) released a master circular for all registered registrars to issue and share transfer agents (RTAs). This comprehensive circular includes various aspects, from registration to responsibilities, transfer-related matters, investor grievance redressal, investor charter, cyber security, and the role of RTAs in the primary market. What does this latest SEBI master circular mean for investors and traders?
Let us take a look!
SEBI Circular for RTAs| Key Highlights
- SEBI issues Master Circulars for Registrars to Issue and Share Transfer Agents (RTAs), consolidating previous Circulars.
- All registered RTAs must designate an email ID. This would be for investor complaint redressal, prominently displaying it for investor awareness.
- RTIs/STAs must submit a certified true copy of their net worth certificate within three months from the close of each financial year.
- RTI/STA compliance officers must submit half-yearly reports on regulatory compliance and investor grievance redressal to SEBI.
- Rights, privileges, obligations, and liabilities acquired under previous circulars remain unaffected.
- The purpose of the latest SEBI master circular is to protect investors’ interests and regulate the securities market.
What are Registrar and Transfer Agents (RTA)?
When you buy stocks, you need someone to manage all that information and keep track of who owns what. That’s where the RTA comes in.
RTA stands for Registrar and Transfer Agent in the Indian stock market.
- RTAs maintain a detailed record of every investor’s transactions and holdings.
- Whenever you buy or sell shares, the RTA updates the ownership records. This ensures that the right person is listed as the owner of the shares.
- RTAs also handle important investor-related services like processing dividends, managing share transfers, and updating investor information.
- They ensure that companies comply with market regulations and help communicate important information between the company and its shareholders.
Some of the RTAs are CDSL, Karvy, CAMS, etc.
Now, let us see what the latest SEBI master circular brings for the RTAs.
Investor Grievance Redressal via the SCORES Platform
The Securities and Exchange Board of India (SEBI) directs all registered RTAs to designate an email ID. This move aims to enhance investor awareness.
For the investor grievance redressal, the SEBI master circular includes the following:
Designating Complaint Channels
All registered RTAs must assign an exclusive email ID for investor grievance redressal.
Visibility and Awareness
RTIs/STAs should prominently display this email ID on their websites and in promotional materials to enhance investor awareness.
Timely Notifications
A daily alert system for pending complaints will operate via the registered SEBI email ID for regulatory communications.
Dematerialisation of Securities
Listed companies must issue securities in dematerialised form for various service requests. This includes the issue of duplicate certificates, claims from Unclaimed Suspense Account, and more.
The securities holder/claimant must complete Form ISR-4, which is available on the Issuer Companies’ and RTAs’ websites.
General Guidelines for RTAs
Apart from the above, the SEBI master circular includes the following:
Mandatory Requirement of Permanent Account Number (PAN):
PAN serves as the sole identification number for all participants in the securities market, strengthening KYC norms and ensuring transaction audit trails.
RTAs must:
- Integrate client databases and transactions with PAN details.
- Develop infrastructure for PAN-based accessibility and query.
- Collect and verify PAN cards of existing and new clients.
- Cross-check collected details with the Income Tax Department’s website.
- Central and State Government entities and certain officials appointed by courts are exceptions, though their exemption claims require verification.
Prevention of Circulation of Unauthenticated News
RTAs must:
- Implement internal codes of conduct to prevent rumour circulation.
- Restrict or disallow access to blogs, chat forums, and messenger sites.
- Maintain records of any usage of such platforms.
- Ensure that a Compliance Officer must approve any market-related news before dissemination.
Guidelines on Outsourcing of Activities
RTAs must adhere to principles outlined by SEBI for outsourcing activities.
- There should be no outsourcing of core business activities and compliance functions.
- Reporting of suspicious transactions by third parties to the Financial Intelligence Unit is mandatory.
General Guidelines for Dealing with Conflicts of Interest
RTAs and associated persons must:
- Establish policies and procedures to identify and manage conflicts of interest.
- Maintain integrity and fair treatment of clients.
- Disclose potential conflicts to clients.
- Implement measures to reduce conflict opportunities.
- Ensure compliance with regulations and periodic review by the board.
These guidelines supplement existing regulatory provisions regarding conflict of interest for RTAs.
Submission of Net Worth Certificate
Every registrar to an issue (RTI) or share transfer agent (STA), whether a body corporate or not, must maintain quarterly statements of capital adequacy requirements for the preceding three financial years.
Additionally, the SEBI master circular also requires them to submit a certified true copy of their net worth certificate not later than three months from the end of each financial year.
Periodic Reporting
The SEBI circular says that the RTI/STA compliance officer must send reports in the right form about following rules and solving investor complaints to SEBI. These reports are due every six months, within three months after each half-year ends. The RTI and STA boards will look over the reports.
Cyber Security Guidelines for RTAs
Rules about cyber security and resilience are for RTAs that handle more than 2 crore folios (Qualified RTAs or QRTAs).
QRTAs must follow the guidelines in Annexure 21 to ensure cyber security and resilience.
Following the Rules:
QRTAs must do detailed cyber audits twice a year.
The MD/CEO has to confirm following SEBI’s rules on cyber security by submitting a declaration along with the cyber audit reports.
Advisory on SaaS Solutions:
- RTAs must maintain strict control and monitoring over critical systems while keeping sensitive data within India’s legal boundaries.
Reporting:
- RTAs must report compliance with the advisory to SEBI, stating, “Compliance of the SEBI circular for Advisory for Financial Sector Organizations regarding Software as a Service (SaaS) based solutions has been made.”
SEBI Master Circular for RTAs| What it Means For Investors
Sebi’s release of the master circular for RTAs brings significant implications for investors.
With clear guidelines from registration to grievance redressal, investors can expect improved transparency and accountability.
The designation of email IDs for complaint registration ensures easier access to grievance resolution. Sebi aims to strengthen the regulatory framework and ensure a conducive environment for investors and market participants alike.
Source– sebi.gov.in/legal/master-circulars/may-2024
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.