Ministry : Ministry of Finance (SEBI)

Ease of Doing Investment and Ease of Doing Business _ Doing away with requiremen

Subject : ministry of finance

Ease of Doing Investment and Ease of Doing Business – Doing away with requirement of issuance of Letter of Confirmation (“LOC”) and to effect direct credit of securities in dematerialisation account of the investor

The Securities and Exchange Board of India (SEBI) has introduced a significant regulatory reform aimed at streamlining investor service processes by eliminating the requirement for issuing Letters of Confirmation (LOCs) and enabling direct credit of securities into investors’ demat accounts, marking a major step toward reducing timelines, operational risks, and enhancing ease of doing business.

Key Points

• SEBI has abolished the requirement of issuing a Letter of Confirmation (LOC) for transactions such as duplicate securities issuance, transmission, transposition, unclaimed account claims, and corporate actions—direct credit to demat accounts will now be standard.
• Investors must have a valid demat account and submit a Client Master List (CML) not older than two months, duly attested by their Depository Participant (DP), along with the updated ISR-4 form when making service requests.
• Depositories are required to develop systems enabling RTAs and listed companies to directly credit securities into investor demat accounts within 30 days of receiving a verified request, post due diligence.
• All references to LOCs and associated formats (including in Annexures 7, 15, and 20 of the Master Circular) have been removed or revised to reflect direct demat credit, aligning procedures across key regulatory documents.
• The new framework comes into force on April 2, 2026; however, any LOC issued before that date can still be submitted to a DP for dematerialisation within 120 days of its issuance.
• Physical certificates involved in these processes must be defaced with a stamp reading “Securities issued in dematerialised form” after processing, except in cases of lost certificates where physical documents are unavailable.

SEBI Dismantles Paper-Based LOC System to Enable Direct Demat Credit

SEBI’s latest circular marks a transformative shift in post-issue investor services by eliminating the long-standing Letter of Confirmation (LOC) requirement, thereby removing a key paper-based bottleneck in the settlement chain. By mandating direct dematerialisation of securities following transmission, duplicate issuance, or corporate actions, supported by updated documentation like attested CMLs and revised ISR-4 forms, the move significantly cuts processing time, reduces fraud risks linked to physical documents, and enhances digital efficiency. This reform is part of broader efforts to strengthen investor protection while modernizing India’s securities infrastructure. It reflects SEBI’s ongoing commitment to align market practices with digital-era expectations of speed, security, and seamless service delivery.