Sebi Proposes Big Boost for Ease of Business: AOPs May Soon Open Demat Accounts for Non-Equity Securities

The Securities and Exchange Board of India (Sebi) has proposed allowing Associations of Persons (AOPs) to open demat accounts in their own names. These accounts would be used to hold certain types of securities, except equity shares. This move aims to make it easier for AOPs to manage securities and encourage the transition from physical to electronic forms of holdings.

In a consultation paper, Sebi suggested changing its rules to allow AOPs to directly open demat accounts. When opening these accounts, AOPs would need to provide their PAN details and confirm that only permitted securities are held, making sure equity shares are excluded.

Sebi is asking for public feedback on this proposal by November 5.

This idea came after Sebi received requests to allow partnership firms, AOPs, and unregistered trusts to hold securities in their own names rather than in the names of individual members, partners, or trustees.

Currently, these entities are not allowed to hold company shares unless they are recognized as separate legal entities. While the law clearly states that they cannot be company shareholders, it is less clear if they can hold other financial assets like corporate bonds, government securities, or mutual funds in demat form. After reviewing the legal provisions, Sebi has decided not to change the rules for partnership firms and unregistered trusts for now.