As a newbie investor, you are excited to open your Demat account and trading with a broking firm of your choice after having gone through various options. You have attached all your KYC documents required for Demat account and are waiting for it to open so you can make your first investment. But your Demat request gets rejected and you are now left hanging for that IPO you were keen on investing. So what are the possible reasons for rejection?
These are the following reasons for which Demat can be rejected –
- Mismatch of a number of shares – The actual quantity of physical Demat is different from what is mentioned in the Demat form.
- Fake Demat form – The share certificates are found to be fake
- Certificates are lost – If the physical share certificates are lost or stolen and not received by the depository.
Various issues with the share certificates –
- Some/all certificates are found to be fake
- Some/all certificates are flagged by their records owing to previously reported as stolen
- Already duplicate certificates issued in lieu of these
- All/some certificates found to be fake or forged
- Signatures of Demat request form do not match with the specimen signature
- Technical Reasons for Rejection –
- Mismatch in holding basis of shares – were held single/joint and now the opposite request has come,
- Incorrect address and mismatch of details with the KYC documents such as address or name.
- In the case of physical shares for Demat, the mismatch of ISIN number on the certificate and on the form
Remedies for Rejection
To ensure that your Demat form is not rejected follow these steps –
- For each physical certificate, a unique DRF (Demat request form) is filled out. Ensure you take this from your broker
- Generally, physical shares are carried forward by future generations in which case, the mismatch of the name will occur. Ensure you submit a legal affidavit showing you as the legal heir
- If the names on the physical certificates are in reverse order of holders, then it is easier to open the Demat in the same order. You can then open multiple Demat.
- Ensure the certificates are in your name, are matching the exact number of certificates on the form
- Mismatch of signature is a common issue. Verify the signature if it is being used after a long period of time. Also, any major changes will have to be authorized in front of a magistrate and get legally approved to be utilized.
- Ensure there is no withholding or STOP notice issued against the certificates
- Many times the ISIN number does not match with the registered ones with the RTA (transfer registrar). Then you might need to check with the company directly if there are multiple ISINs for partly paid up or fully paid up shares.
Most common Demat forms are now filled online and have rare chances of mistakes or verification issues. However, if you are going for physical shares, many and all of these aspects should be kept in mind.
Opening a Demat account is an easy process and an investor can have multiple accounts. You can open one for day and intraday trading and another for long term investments. This will make it easier for you to track your gains and losses for taxation purposes as well.
As a new investor, compare the different services of full-service and discount brokers. You can look at subscription services from the Bajaj Financial Securities Limited trading account as it offers huge savings on brokerage costs.