DEPOSITORY PARTICIPANTS – Queries &
Standard Replies
1. What is a
depository?
A “Depository” is a provider of facility for holding securities
in book entry or electronic form. It is a kind of bank for securities like
shares, debentures, bonds, etc. It also facilitates transactions in the
securities held by it.
2. What is
dematerialization (Demat)?
“Dematerialization” is a process by which physical
certificates are converted into electronic form.
3. What is Rematerialization (Remat)?
Rematerialization is the process of converting
securities held in electronic form in a demat account back in physical
certificate form.
4. Who is registered owner of Securities?
When securities of a company are held in physical
form by an investor, his/ her name is recorded in the books of the company as a
‘Registered Owner’ of the securities. When physical shares are converted into
electronic form, the depository becomes ‘Registered owner” in the books of the
company and investor’s name is removed from books of the company.
5. Who is a Beneficial Owner (BO)?
All the benefits of the dematerialized shares are given
to the actual investor since the Depository holds the securities in a fiduciary
capacity on behalf of the investors who have opened a demat account with the
depository. Hence, the actual investor is the “Beneficial Owner” (BO) of the securities.
6. Who is a Depository Participant?
A “Depository Participant” (DP) is an agent of the
depository who is authorized to offer depository services to investors.
7. Who can be a Depository Participant?
Financial
institutions, banks, custodians and stockbrokers complying with the
requirements prescribed by SEBI/ Depositories can be registered as DP.
8. Who is an Issuer?
“Issuer” means any entity such as a corporate / state
or central government organizations issuing securities which can be held in
depository in electronic form.
9. Who is an RTA?
An RTA (Registrar and Transfer Agent) is an agent of
the issuer. RTA act as an intermediary between the issuer and depository for
providing services such as Dematerialization, Rematerialization, Initial Public
Offers and Corporate actions.
10. What is an ISIN
(International Securities Identification Number)?
“ISIN” is a unique 12 digit alphanumeric code given
to a security, shares, debentures, bonds etc. when the security is admitted in
the depository system. First two digits of the ISIN code indicate country of
registration. For all securities registered in depository in
11. Whether different
securities issued by the same Issuer will have same ISIN?
No, different securities
issued by the same issuer will have different ISIN code.
12. What are the
services provided by a Depository?
Following services are provided by a depository to
the beneficial owners but of course,
through a depository participant:
a. Opening a demat account.
b. Dematerialization, i.e. converting physical
securities into electronic form.
c. Rematerialization, i.e. converting electronic
securities balances held in a BO
account into physical form.
d. Maintaining record of securities held by the beneficial
owners in the electronic form.
e. Settlement of trades by delivery or receipt of securities
from / in BO
accounts.
f. Settlement of off-market transactions between BOs
g. Receiving electronic credit in respect of
securities allotted by issuers under IPO or otherwise on behalf of demat account holders.
g. Receiving non cash corporate benefits, such as, allotment
of bonus and rights
shares or any other
non cash corporate benefits given by the issuers in
electronic form on behalf of its demat account holders.
h. Pledging of dematerialized securities &
facilitating loans against shares.
i. Freezing of the demat account for debits, credits,
or both.
13.
What is the legal framework governing the depository functions in
A depository functions under the following rules and
regulations:
1. The Depositories Act, 1996,
2. SEBI (Depositories and Participant) Regulations.
3. Depository Bye-laws which are framed under the
above two documents.
4. Prevention of Money Laundering Act (PMLA), 2002
14. Can a
demat account be opened directly with Depository?
No. A demat account can not be opened directly with
Depository. It has to be opened only though a DP of Depository.
15. Can an investor
open multiple demat accounts?
Yes, an investor can open multiple demat accounts. There
is no restriction on number of demat accounts which an investor can open.
16. Is it necessary for an investor to open an account with the
same DP as that of his broker for settling the trades done through him?
There
is absolutely no compulsions on any investor to open his demat account with the
same DP as that of his broker. Investor can open account with the DP of his/her
choice and can carry on his trading activity through a broker of his choice.
17. Can a demat account be opened in the name of
Joint Holders?
Yes. A
demat account can be a opened in a single name or in
joint holders’ name. There can be maximum three account holders i.e. one main
holder and two joint holders.
18. Can a Demat account be opened for a minor?
Demat
account can be opened in the name of a minor. The account will be operated by a
guardian till the minor becomes major. Guardian has to be the father or in his
absence mother. In absence of both, father or mother, the guardian can be
appointed by court.
19. Can minor be a joint holder in another demat
account?
No. Minor can not be a joint holder in a demat account.
20. Can a demat account be opened in the name of
a trust?
A
demat account can be opened in the name of a trust If the trust is registered
under the Public Trust act 1860 / Societies Registration act / Bombay Public
Trust act / public trust act in force in the state. If the trust is a private
or unregistered trust then a demat account shall be opened in the name of
trustees as an individual account. If the trust has more than three trustees,
then they will have to decide in whose name the demat account will be opened.
21. Does an NRI need any RBI permission to open a demat account?
No
permission is required from RBI to open a demat account. However, credits and
debits from demat account may require general or specific permissions as the
case may be, from designated authorized dealers.
22. Is nomination compulsory for a
demat account?
SEBI has mandated that nomination should be recorded for a
demat account held by individuals. If nomination is not to be given then the
account holder(s) should give a written and signed declaration to the effect.
23. Is dematerialization of
securities compulsory?
According to the Depositories Act, 1996, an investor has the
option to hold securities either in physical or electronic form. Part of
holding can be in physical form and part in demat
form. However, SEBI has notified that settlement of market trades in listed
securities should take place only in the demat mode.
24. What type of instruments are available for demat at Depository?
All
types of equity/ debt instruments viz. Equity shares, Preference Shares, Partly
paid shares, Bonds, Debentures, Commercial Papers, Certificates of Deposit,
Government Securities (G-SEC) etc. irrespective of whether these instruments
are listed / unlisted / privately placed can be dematerialized with Depository,
if they have been admitted with Depository.
25. Is there any charge for dematerialization of physical
certificates?
Depository
does not levy any charge for dematerialization of securities. However, DPs may
collect dematerialization charges towards postage / courier charges etc. as per
their tariff sheet.
26. How many Depositories are there in
There are two
Depositories in
1.
National Securities Depository Limited
(NSDL)
Trade World, A
wing, 4th & 5th Floors,
Kamala Mills
Compound,
Tel: (022) 2499
4200 (60 lines)
Fax: (022)
24976351
Email:
info@nsdl.co.in
2. Central Depository Services (
PhirozeJeejeebhoyTowers,
16thFloor,
Mumbai 400001
Phone:91-22-22723333
Fax91-22-22723199/22722072
Email : investors@cdslindia.com
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