SEBI tells promoters to convert holdings in demat form

Market regulator Securities Exchange Board of India (SEBI) on Friday asked the promoters of listed companies to convert their entire equity holding in the dematerialized form by September 2011, failing which it will ban trading of such shares in the normal segment of the market.

"The securities of companies shall be traded in the normal segment of the exchange if and only if, the company has achieved 100% of promoter's and promoter group's shareholding in dematerialized form latest by the quarter
ended September 2011", SEBI said in a circular.

It further said trading of shares of those companies, which do not satisfy the criteria of 100% dematerializing of equity of promoters, will be allowed for trading under the 'trade segment' instead of 'normal segment'.

According to SEBI, this was being done to promote dematerialization of securities, encourage orderly development of the securities market and improve transparency in the dealings of shares by promoters including pledge or usage as collateral.

Under the 'trade segment', it is mandatory to take delivery of shares and most companies prefer to get their equities traded under the 'normal segment'. In September last year, SEBI had "mandated securities of companies to be traded in normal segment, if and only if, the company has achieved at least 50% non-promoter shareholding in dematerialized form".

Also read: SEBI decision on takeover code likely on June 30