The Securities and Exchange Board of India (SEBI) has granted Associations of Persons (AOPs) significant access to demat accounts for holding securities. This decision aims to encourage greater participation in the capital market. As a result, investors associated with AOPs will benefit from digitally holding shares, bonds, and other securities, making the investment process more transparent and convenient. Market experts believe this step will also significantly benefit institutional investors and increase market liquidity.
SEBI: Market Regulator
On Tuesday, SEBI permitted Associations of Persons (AOPs) to open demat accounts in their names to hold mutual fund units, corporate bonds, and government securities. However, equity shares are excluded.
This new SEBI regulation, effective June 2nd, simplifies the investment process for AOPs. An AOP is a group of individuals working together for a common purpose, such as a business or project. This decision will allow AOPs to access institutional investment opportunities and facilitate their market participation.
SEBI Allows AOPs to Open Demat Accounts
SEBI announced in a circular that, after verifying relevant laws and consulting with stakeholders, the decision to permit Associations of Persons (AOPs) to open demat accounts in their names was made to ease business operations. Under this, units of mutual funds, corporate bonds, and government securities can be held in demat accounts.
However, SEBI clarified that these demat accounts cannot be used to subscribe to or hold equity shares. The objective is to provide AOPs with greater convenience in the investment process and boost their business activities.
Accountability in Case of Disputes
AOPs must adhere to the rules and regulations outlined in their constitution. SEBI has clarified that PAN details of the AOP and its principal officer (such as the secretary or treasurer) will be required. In case of any dispute, accountability will be sought from the principal officer, although all AOP members will remain liable.
Furthermore, SEBI has instructed member associations of the Industry Standard Forum (ISF) and stock exchanges to publish industry standards related to LODR (Listing Obligations and Disclosure Requirements) regulations on their websites.
