CDS to Limit Activity on Dormant Accounts Until Reactivation as Part of Investor Protection Measures

Central Depository Systems (Pvt) Ltd (CDS), a subsidiary of the Colombo Stock Exchange (CSE), has announced new measures aimed at protecting dormant CDS accounts that have remained inactive for three years or more. The measure will involve a staggered suspension framework for dormant accounts which can be re-activated at any time quite easily by account holders subject to updated KYC information.

This initiative, listed in CDS’s latest circular, is designed to protect CDS account holders from fraud risks in dormant accounts in accordance with CDS Rule 3.10, to protect investors. It shall classify CDS accounts which have remained dormant for 3 years as “Non-Operative Client Accounts” and restrict transactions and dealings in the account until such time the account is reactivated by the Account Holder. 

The Non-Operative Client Account status is not permanent, and the initiative will not affect the ownership rights of the account holder, nor restrict the receipt of corporate action entitlements, including dividends and other distributions or result in the transfer, forfeiture, or cancellation of securities held in the account.

CDS account holders can re-activate their accounts at any time they wish either through the CSE Mobile app via the ‘Non-Operative Reactivation’ option or through the CDS website, and this is not subject to any deadlines. Reactivation will only require submission of updated KYC information .

The suspension of dormant accounts will be carried out in phases based on the duration of inactivity as follows: