Colombo Stock Exchange to Have Locked Accounts After Going Scripless

16th December 2010, www.lankabusinessonline.com

Sri Lanka's Colombo Stock Exchange will create locked accounts for shareholders of listed firms who do not wish to trade after the bourse goes scripless, a statement said.

The accounts in the CSE's Central Depository Systems are part of a move to fully dematerialise all listed securities by converting all paper-based physical share certificates into electronic form, it said.

"The CDS would introduce a facility for shareholders of listed securities who would not wish to trade their securities, to 'lock' their securities in a separate locked balance in their own CDS accounts."

Once securities are 'locked' they would not be visible to CDS participants like stock brokers and custodian banks, maintaining the confidentiality of the information and safeguarding shareholders from unauthorized transactions by stock brokers.

Trading on locked balances would be suspended, the statement said.

Securities could be 'unlocked' from a locked balance and transferred to the trading balance of the CDS account holder only with the written authority given by the CDS account holder to the CDS through stock broker and custodian banks.

Withdrawals from the CDS would be allowed for mortgaging of securities, the CSE said.

CDS account holders having securities deposited in locked balances in their CDS accounts would receive a separate statement every month.

The markets regulator, the Securities and Exchange Commission, has made it mandatory for securities of new listings to be in electronic form from January 01, 2011.

All applicants for initial public offers which open for subscription on or after January 01 will have to open CDS accounts and indicate their CDS account numbers in the IPO application form.

"The company secretary and registrar would not issue securities certificates to the applicants who do not have valid CDS accounts," the CSE statement said.

Shareholders of existing listed companies which got listed before January 01, 2011 will be given to a year from January 01 to convert their shares into electronic form.