Capital market regulator SEBI has proposed allowing associations of persons (AoPs) -- a group of people or entities -- to own demat accounts for holding certain securities in dematerialised form.

SEBI's October 16 consultation paper proposes AoPs can hold securities other than equities in the name of the entity, and the BO account can be in its name. "Towards the pursuit of Ease of Doing Business, we propose to allow holding of units of mutual funds, corporate bonds, and government securities by AoPs in their own demat accounts. This would also encourage dematerialisation of securities held in physical form," says SEBI.

AoPs can be organised in any form -- joint venture associations, cooperative societies, and cooperative housing societies, etc.). They can hold government securities, mutual fund units and corporate bonds.

"In the case of Association of Persons (AoP), the beneficiary owner (BO) account can be in the name of AoP and securities (other than equity shares) can be held in its name. PAN card details of the respective AoP shall be obtained," says the consultation paper.

The proposal says the depository participants will seek confirmation from the AoP while opening a demat account in their name. "The statutes governing the AoP permit the AoP to hold securities that are being dematerialised and that only such securities that an AoP is permitted to hold will be dematerialised or subscribed in demat form."

The Demat account, however, will not be used for subscribing or holding equity shares.

The move comes amid suggestions that depositories should be allowed to open demat accounts in the names of partnership firms, associations of persons (AoP), and unregistered trusts instead of the current practice of only natural persons. These include the names of its partners, persons associated with AoP, and trustees, respectively.

associations of persons

SEBI proposes AoPs to hold MFs, bonds, govt securities in demat accounts