Investors who are looking to capitalise on investments either in the stock market, an IPO, or mutual funds, among other securities, have to open a Demat account to do so. A Demat account is a holding facility that stores all the securities of an investor in electronic format.
The Benefits of a Demat Account
Previously, people who had securities, say, stock, held these in the form of certificates, made of paper. These physical certificates proved cumbersome for the most savvy investor as they were prone to wear and tear, loss, and even theft.
When dematerialisation of these physical certificates was launched in 1996, the holding of securities became refined and secure, and now, a Demat trading account is the only way to invest in the Indian financial markets.
Opening a Demat account to hold the shares you have with you is one aspect of having a Demat account. However, if you have physical (paper) share certificates that have to be converted into digital formats, you have to undergo a process of dematerialisation.
Through this, your paper certificates get changed into electronic holdings that can be stored in your Demat account.
In such a case, the holder of physical share certificates must apply to their DP (depository participant) or broker for the conversion and submit a Demat Request Form (DRF) for the same.
Nonetheless, there are grounds for rejection of this form, and in case it is rejected, you should know what to do next, but first, you must know more about this form.
The Demat Request Form
As per the regulations of the chief governing body of the Indian financial markets, the Securities and Exchange Board of India (SEBI), physical shares must be changed to electronic holdings if they are to be sold.
Consequently, the use of an open demat account is only possible if there are holdings in electronic formats in the account. To change physical share certificates into electronic holdings so that they can bestored in a Demat account, holders must go through a process of transmission. In this process, the physical shares must be submitted along with a Demat Request Form or DRF to the depository participant where the holder has opened their Demat account.
At an initial level, the documents are checked by the depository participant in question and then sent to the registrar of the concerned company (of stock held) for verification.
Why is a DRF Declined and What Action Should You Take?
If you want your physical shares converted into digital formats and held in your Demat open open trading account, you need to know the grounds for rejection of the DRF and the possible action you can take if this happens. Here are some common grounds for rejection and the action you can take for each instance:
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Mismatch of the Holder’s Name
Your DRF could be rejected or declined as there may be a mismatch between your name on the physical share certificate and the name registered with your DP. You may have to solve the issue by submitting a legal affidavit stating why there is a name mismatch.
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Mismatch of the Holder’s Signature
Your DRF could be declined due to a mismatch between your signature on the physical share certificate and the one registered with your DP. Over time, signatures do tend to change, and the remedy for this problem can be the submission of a legal affidavit.
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Failure to Sumit a DRF for Every Individual Stock Certificate
Each physical share certificate has to be accompanied by a different DRF. Hence, a separate DRF must be provided with each physical certificate. Failure to do this leads to rejection and you will have to resubmit a fresh DRF for every certificate separately.
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Difference Between Share Certificate Numbers
In case the name of the holder on the share certificate does not match the name on the Demat trading account registered with the DP, the DRF will be declined. In such cases, holders will have to submit attested affidavits or open a new Demat account with names that match.
Solutions For DRF Issues
In most cases, the DRF does not get rejected as your DP does an initial check and advises you if there is any ground for rejection of your form. Additionally, most rejections take place due to minor reasons and solutions are readily available.
For instance, the number of shares mentioned on the DRF does not match the number of shares recorded with the registrar, etc. Either the holder will have to submit a new DRF or an affidavit. Serious issues may occur if it is found that certificates are fake. In such cases, holders must contact sellers to validate the authenticity of holdings.
