Capital market regulator Sebi on Friday proposed amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, to make it easier for investors to transfer and dematerialise physical securities transacted before April 1, 2019, while also simplifying the demat process for listed entities and investors.

In a consultation paper, Sebi has suggested a temporary relaxation in regulation 40(1) of the LODR, which currently bars the transfer of securities unless they are held in dematerialised form. The market regulator said that several investors had failed to meet the March 31, 2021, deadline to re-lodge transfer deeds that were executed before April 1, 2019, due to issues such as the death of sellers, dissolution of corporate sellers, or misplaced documentation.

To address these concerns, Sebi has already opened a six-month special window—from July 7, 2025, to January 6, 2026 — for investors to re-lodge such transfer deeds. According to data from the top eight registrars and transfer agents (RTAs), nearly two-thirds of requests received during the first 45 days of this window relate to fresh lodgement of pre-2019 physical transfers.

Based on recommendations from a panel of RTAs, listed companies and legal experts, Sebi has proposed a regulatory amendment allowing an exception to the current demat-only rule for a limited period that will be decided by its board.

“The proposed provision shall be applicable only to those investors who executed their transfer deeds prior to the deadline of April 01, 2019 so that such investors are enabled to get their physical securities transferred in their name and subsequently dematerialised,” the consulting paper, which seeks public comments till November 7, 2025, said.

The relaxation will carry a sunset clause to preserve Sebi’s long-term goal of full dematerialisation. To further simplify the dematerialisation process, Sebi has proposed doing away with the current system of issuing a “Letter of Confirmation” (LOC) to investors after processing requests such as transfer, duplicate certificates or transmission of physical shares.

Under the existing setup, investors were required to submit an LOC to their depository participant within 120 days to have shares credited to their demat accounts — failing which the shares are moved to a Suspense Escrow Demat Account. Sebi described the process as redundant and time-consuming. Instead, it has proposed allowing RTAs and listed entities to credit securities directly to investors’ demat accounts after due diligence.