Sebi allows Associations of Persons to open demat accounts. Here’s why | Stock Market News
Source: Live Mint
The Securities and Exchange Board of India (Sebi) on Tuesday granted permission to Associations of Persons (AoP) to open demat accounts in their own name.
Through demat accounts, AoPs can hold mutual fund units, corporate bonds, and government securities.
However, such demat accounts cannot be used for holding equity shares.
The new rule aims to make it easier for Associations of Persons to invest while ensuring regulatory compliance.
“Upon examination of the relevant legal provisions and after detailed deliberations with stakeholders, to foster and ensure ease of doing business, it has been decided to allow opening of demat account in the name of the AoP for holding securities, such as units of mutual funds, corporate bonds and government Securities in demat account,” Sebi said in a circular.
“Demat account is not to be used for subscribing/holding equity shares,” the market regulator further said.
This development comes after the market regulator had received representations to permit the opening of demat accounts directly in the name of AoPs.
The new rule will come into effect from June 2, 2025.
Regulatory compliance
The AoPs are required to follow the rules governing its constitution.
Sebi also said that PAN details of the AoP and its Principal Officer (such as a secretary or treasurer) need to be provided.
As per the Sebi rules, the principal officer will be the legal representative in case of disputes. All members of the AoP are jointly responsible for the account.
In a separate circular, Sebi has asked Industry Standards Forum (ISF) member associations and stock exchanges to publish industry standards regarding LODR (Listing Obligations and Disclosure Requirements) Regulations on their websites.
The ISF, including Assocham, CII, and Ficci, has created industry standards in consultation with Sebi. These standards aim to simplify and improve how companies disclose material events.
Listed companies are required to follow these standards to comply with the rules.
