Securities and Exchange Board of India "(SEBI) constituted a Committee on “Strengthening the Guidelines and Raising Industry Standards for RTAs”, which included representatives from RTAs, Issuer Companies, Depositories and Bankers to Issue. The objective of the Committee was to suggest guidelines to streamline and strengthen the procedures and processes with regard to handling and maintenance of records, transfer of securities and payment of dividend/interest /redemption by the RTAs, Issuer Companies and Bankers to Issue.
Based on the recommendation of Committee, SEBI, on Friday, April 20, 2018, put in place detailed guidelines to streamline and strengthen procedures with regard to handling and maintenance of records, transfer of securities, and payment of the dividend by the registrar and share transfer agents.
These guidelines cover the following broad areas:
- Provisions with respect to Payment of Dividend/interest/redemption/ redemption
- Provisions with respect to Transfer/Transmission/ Correction of errors etc.
- Compulsory internal audit of RTAs
Maintenance of Documents:
The prescribed documents need to be maintained for a period not less than eight years after completion of the relevant transactions by bankers to an issue, issuer companies or by RTAs on behalf of such firms. Also, issuer companies will have to strictly monitor the activities of their RTAs.
In case, share transfer agent activities are carried out in-house by issuer companies, then such firms need to ensure that their in-house share transfer activities comply with the relevant norms as applicable to them. According to Sebi, RTAs, bankers to issue, and the issuer companies can put in place more stringent internal checks and controls if they so desire.
The issuer company, among the others, will have to ensure that the master file, having detailed list of beneficiaries of dividend or redemption, need to include company name, folio number, account details among others. The file needs to be shared with the banker through a secured process.
Processing bank will have to ensure that any dividend, interest and redemption instrument lying unpaid beyond the validity period of the instrument need to be canceled. Besides, such amount that has been transferred earlier by the issuer in the said account will have to be credited back immediately to the issuer company.
This provision will come into effect after 30 days. RTAs and issuer companies will have to ensure that a folio once allotted to a person should never be re-allotted to any other person under any circumstances, said the circular.
RTAs and Issuer Companies shall ensure that all updation in the folio records shall be enabled only through front-end modules. No back-end entry/updation /correction should be permitted. The provision will come into effect after 90 days.
For any correction of errors, Sebi said the RTAs must take prior approval from the company similar to cases of transfers and transmissions. Under the new norms, the issuer company and RTAs will have to exercise enhanced due diligence where dividend, interest and redemption remain unpaid for at least three years; PAN as well bank account details not available in the folio. RTAs need to maintain a list of such account folios and share with the issuer company at the end of every quarter of a financial year.
Internal Audit of RTA:
According to Sebi, all RTAs are required to carry out the internal audit on annual basis by independent qualified Chartered Accountants or Company Secretaries or Cost and Management Accountants who do not have any conflict of interest. Such auditors will have a minimum experience of three years in the financial sector and need to be appointed for a maximum term of five years, with a cooling-off period of two years.
The RTA will have to submit a copy of the report of the internal audit to issuer company within three months from the end of the financial year.
To access SEBI Circular, click on the link here
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