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Minor Demat Account Rules
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Minor Demat Account
If you have been looking for minor demat account rules, you have reached your destination! Here, we will talk about the rules and regulations set in place by the regulatory body – SEBI, to avoid any chaos or problem for the client or stockbroker.
But before that, we need to know what a minor demat account is and why demat account is required for minors? Does it actually allow them to invest or trade?
Minor demat account is the one that is opened by one who is less than 18 years of age.
If you are well acquainted with the share market, then you must know about minor demat accounts. But if you are not, let’s help you out.
The demat account for minors is the one opened by a guardian (natural or court-appointed) for an off-market transfer of shares. This account is for a minor, i.e., below the age of 18 years.
As the definition is clear now, let’s talk about the minor demat account rules.
What Are Minor Demat Account Rules?
When you look for information about a minor demat account, you search for its charges, account opening procedure, documents required, and many such aspects. But, have you ever given a thought – what are minor demat account rules?
Yes?
Well, congratulations on finding the place that answers all your queries. We bring to you all the minor demat account rules or SEBI guidelines for demat account for minors in the form of the most asked questions by the traders or investors in the share market.
So, let’s go!
Can A Demat Account Be Opened For A Minor?
Yes, you can open a demat account in the name of a minor. The account is operated by the guardian till the time the minor account holder turns major. The guardian can be either of the parents.
In case of the absence of one or both, mother and father, the guardian is appointed by the court. The corresponding guardian selects the stockbroker they wish to engage with and then opens a demat account for the minor.
Can Minor Be A Joint Holder In Another Demat Account?
No, a minor is not permitted to become a joint holder in any other demat account. They can only have an independent account under the category of a minor.
Generally, the minor demat account does not have a trading account, which means that only off-market transfers can be done through this account. You can not trade here.
To commence the process of trading, you have to convert the account to a major after the account holder becomes an adult.
Can A Minor Trading Account Be Opened?
Trading Account for a minor is opened only in special cases when the sole purpose of sale of securities that the minor possesses by way of investing in an Initial Public Offering (IPO), inheritance, off-market transfer of shares, corporate actions under the following categories:
- Transfer between family members
- Gift or Donation
- Implementation of the Regulatory Directions or Government Orders.
However, the account is entirely operated by the natural or court-appointed guardian till the minor becomes an adult.
Can Trading Be Done In A Minor’s Trading Account?
As stated above, a minor can trade using their trading account under only a few conditions, and those have been specified in detail.
The guardian can open a trading account only in the scenario where they sell the securities possessed by the minor in the above-mentioned conditions.
In fact, a minor is not permitted to enter a contract with any stockbroker to purchase or sell any security until they become a major.
Is It Necessary For The Guardian To Complete KYC At The Time Of Opening A Minor Demat Account?
Yes, it is absolutely necessary for the guardian to complete the KYC (Know Your Customer) at the time of opening a minor demat or trading account. In fact, it is also mandatory to complete the KYC of the minor.
Can A Minor Demat Account Be Continued When They Become A Major?
Yes, a minor demat account can be continued when they become a major. However, when they become an adult or major, the individual should confirm the balance in his or her account.
Post this, they have to complete the formalities like KYC, updating the PAN Card, etc., for opening a demat and trading account to continue with the same account(s).
But, in some cases, you might require to open a new account and transfer the holdings to it. For this, you should talk to the stockbroker for a clearer picture.
Conclusion
From searching for the most suitable stockbroker to opening a minor demat account, it is a long journey, but it becomes way more challenging if you have no idea about the minor demat account rules.
The guardian (natural or appointed) should have a brief understanding of these rules to avoid any hassles in the long run, which is the case here.
These rules are formulated by the regulating body of the share market – SEBI.
There are various guidelines about a minor trading account, minor demat account, operating scenarios, transfer of shares, the conversion from minor to major, and many others.
We hope that you found this article helpful and educated you about the various aspects of having a minor demat account for your child.
Happy trading!
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