Depositories and direct benefit transfer

The SEBI has proposed to allow depositories to distribute all securities market related cash benefits such as dividend and redemption payments to investors. In its discussion paper that is open for public comments, it states that: “There is scope for improvement in the areas related to efficient tracking of payment, updating of investor bank details, disclosure of unpaid cash benefits, etc, in order to further enhance the investor experience and to make securities market more efficient.”

At present, such cash benefits are directly distributed by companies to investors mostly through their registrar and transfer agents. Since all cash benefit distributions are processed outside the depository system, no information is available in the demat account with respect to entitlement of cash benefits and payment of the same to the investors.

For investors also the move is beneficial as it helps them easily keep track of the benefits due to them as through depositories they will be able to track such gains though the consolidated statement or SMS alert, which is missing when a company transfers the sum directly. However, in case of securities held in physical form, the company would continue to handle the distribution of cash benefits

olmdesk@outlookindia.com