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Depositories

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Published in: Banking & Finance
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Depositories for CS Students

Cs A / Agra

1 year of teaching experience

Qualification: CS , B.com(Hon)

Teaches: Auditing, B.Com Tuition, BBA Tuition, English, Business English, Effective Communication, Public Speaking, Spoken English, Civil Laws, Company Laws, Contract Act Laws, Criminal Laws

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  1. sno Depository - A Depository is an organization a Central Bank where the securities of a shareholder are held in the electronic form at the request of the shareholder thro ugh the medium of a Depository Partic ipant. Depo sitory means a company formed and ægisteæd under the Companies Act, 2013 and which has been granted a certTicate o f registration under s*ction 12(1A) of the Act, 1992". 'Ihere are two Depositories functioning in India, namely the National urities Depository finite d (NSDL) and the Central Depository B±rvices (India) I.imited (C DSL). rlb utilize the services offered by a depository, the investor has to open an account with the deposit01Y thro ugh a participant, similar to the opening of an account with any of the bank branches to utffze services of that bank. Flinc tio ns of De po sitory may inc lude Ac c o unt ope ning , De mate rialisatio n, Re ma te lialisa tio n, ttle me nt, IPO , Ple d g mg , c o IPO rate be ne fits O F sno RY 1. 2. 3. 4. 5. 6. m-nination of bad deliveries mnmation o f all lisks asso c iate d with physic al c e rtific ate s hnmediate transfer and registration of sec uritie s Fa ste r disb urse me nt of non c ash c o rpomte be ne fits hke rights, bo nus, etc Reduc tion brokerage by many brokers for tradmg demate rialized se c uritie s m-nination of problems related to change tra nsmissio n, e tc MO DMS OF snoRY Immobilisaåon v/ s Dematerialisaåon Pa lüc ula IS Physic a I C e rtific a te s Mainta ining of Re co rd s Re -issue o f Physic al C e Itific a te s c o st e ffe c tive me tho d 1m m o b ilisa do n Whe p hysic al shaæ certTic ate s are kept in vaults with the depository for safe c usto d All sub se q ue nt tra nsa c tio ns in these securities take place in book ent form rme actual owner has the right to withdraw his physic al se c urftie s as and when de süe d. Compamtively, le ss cost e ffe c tive of address of investor, De m a te lia lisa fio n No Physic al scrip in existence o nly e le c tm nic records maintained by depository Certificate can be re-issued only a ferre is cost effective and and has been adopted in India.
  2. Dematerializaåon — Dematerialization is a process by which the physical share certTicates of an investor are taken back by the Company and an equivalent number of securities are credited his account electronic form at the request of the investor: Dematerialization of shares is optional and an investor can still hold shares in physical form. However, the investor has to demat the shares he/she wishes to sell/ purc hase the same thro ugh the Stock Bcc hange s. Depository Parücipant - rlhe Depository Participant maintains sec urfties account balances and mfrnate the status of holding to the account holder from fine to fine. It acts an agent or intermediary between the investor and the depository. Fhlancial Institutionshke banks, custodians, stockbrokers etc. can become participants the depository. An investor opens an account with depository thro ugh the DP. rlhe nanctions of DP may inc lude - Ac ts as an Agent of Depository, Ac count opening, Fac Mtates dematerialization, B±ttles trades in electronic segment Pm c e ss of De ma te lia liza don rlb open a demat acc o unt 2. lodges DRF (De m a te lia lisa tio n Request Form ) and c e ltTic a te s 3. De po sito ry C o nfirm a tio n 5 4 Inthn a te s Infin a te s 6 Re g istra Issue r De po sitory c dits inve sto r a/c
  3. 1. 2. 3. 4. 5. 6. Inve sto ro pe ns ac c o unt with DP Inve storlo d ge s DRF and c ertific ate s with DP DP infinate s the De po sitory De p o sito a te s Re gistra Issue r Re gistradlssue rc o nfrms de mat to De po sitory De po sitory c dits inve sto r a/c mecåonic Credit In New Issues — Where investor already have a demat account and there is no physic al share certificates in existence 1. Investor opens account with DP 2. Submits applic ation with option to hold sec I-uities deposit01Y givmg DP- Id and Client-Id 3. Registrar uploadslistofallotteesto Depository 4. Depository c led its allottee's account with DP Rematerialisaåon - Rematerialisation is the process by which a client can get his electronic holdings conve rte d into physical certific ate s. rlhe client has to submit the rematerialisation request to the DP with whom he has an acco unto 1996 Digibility Condiåon to act as a depository and provide depository services be formed and re istered asa com an under the Com aniesAct, be istered with SEBIasa de osito underSEBIAct, 1992 has framed bye-laws with the previous approvalofSEBI has one or mole artic • ants to render de osito services on its behalf complies w ml Depositories Ac t, 1996 and SEBI (Depositories and Partic Re gulatio ns, 1996. has ade uate stems forelectmnic transactions as e r the satisfaction of SEBI Note - rlhe ofægistration isa continuing one and the moment the registration is cancelled or revoked or surrendered, the pelson shall cease to act as suc h
  4. OWNm - (Sec 5&6) 1. Investor w 111 enter into an agæement with any depository through depository p artic ip a nt; 2. Investorwm sun-ender the share/secuity certific ate to the issued company 3. rme issuer w 111 cancel the share certificate & enter the name of depository as ægisteæd owner, 4. A deposit01Y w 111 then enter the name of the investor in its records, as the beneficial ownerofthe shares; 5. Every depository shall mamtam a ægisterand an index of beneficial owners of shares tion 11); 6. Rights of Beneficial & Registered Owners — 'lhe depository as a registered owner should not have any voting rights or any other rights in respect of sec urfties held by it. 'Ihe beneficial owner is entitled to all the lights and benefits and be subjected to all the liabilities m æspectofhis sec uritiesheld by a depository 10) 7. Pledge Or Hypothecation - A beneficial owner may with the previous approval of the depository create a pledge or hypothecation in respect of a security owned by thro ugh a depo sitory. Every beneficial owner should give infination of such pledge orhypothecation to the depository participant and such depository is requhed to make entries in its records acc o Idingly. Any entry in the æcords of a depository should be evidence of a pledge or hypo the c ation. c tion 12) OVNON OF TIE NVBIORr10 RmAVE smUR11Y OR HOD wrMDmsr10RY (Sec don 8) Every pelson subscribing to securities offered by an issuer shall have the option either to receive the security certificates or hold securities with a depository. If Investor opts to hold a security with a depository, the issuer shall intünate such depository the detafls of allotment of the security, and on receipt of such information the depository shall enterin its records the name of the allottee as the beneficial ownerofthat se c urity. Opåon to opt out in æspect of any security (Sec don 14) - If a beneficial owner seeks to opt out of a depository in æspect of any security he shall inform the depository accordingly. 'Ihe depository w 111 make appmpriate entries in its records and shall info nn the issuer.
  5. rro BEN FUNGBIEFORIVI ( Sec don 9) In dematerialization of sec urities in the depository mode, all securities held in depository shall be fungible ie. all certific ate softhe same security shall become intelchangeable the se nse that investor loses the right to obtain the exact certificate he sunenders at the fine of entry into depository. lhe issuer shall within 30 days of the of mtimation from the depository and on fulfilment ofpæscnbed conditions and payment fees issue the certificate of sec uritiesto the beneficial owner. CAILFORNFORIVIATON AND & ISSUE Dmmr10RS - If SBI is satisfied that it is nece ssary the public interest or in the interest of inve sto IS, it may c all upon any issuer, de po sito ry, partic ipant o r be ne fic ial o w ne r to submit in writing any information relating to the securities held in a depository. SEBI may authorise any person to make an or inspection ælation to the affüs of the issuer, beneficial owner, depository or participant. Such Person should submit a repo It of such enquhy or inspection to SEBIwithin the period as may be specified the Every d hector, manager, pa liner, secretuy, officer or employee of the depository or issuer or the participant or beneficial owner shall on demand produce before the pelson making the enquhy all infonnation/æcolds/ doc uments as may be re q lfied by the person in relation to the matter on which enquhy is be ing conduc te d. SEBI, after the enquiry may issue any d hectors to any depository or any person associated with the securities market to any issuer as it may deem appropriate in the interest of investmsorthe securities market. Penalty of RUPm but which may extend to one lakh rupees for each day during which such failure condnues subject to a MAX MUM OF ONE cmRERUPm offorfollowing c onåavenåon - 1. 2. 3. 4. 5. 6. Note Failure to munish infonnation / re tum etc . Failure to enter into a reement Failure to redress investor's Gievances Dela in Demate lialization or issue ofcertific ate of se c unitie s Failure to Reconcle lecolds Failure to com I with issued b SEBI - Whoeverfaflsto comply with any provision of Depository Ac t, the mles or the regulations or
  6. bye -laws made or d hections issued by the SEBIfor which no separate penalty has been provided, shall be liable to a penalty OF at least one la kh rupees but which may extend to one c 10 re rupees. Power to adjudicate penalty — For the purpose of adjudging & hnpo sing penalty appoint any officer not below the rank of a Division Chief ofSBIto be an adjudicating officer for hold mg an in the prescnbed manner after giving any person concemed a reasonable opportunity of being heard for the purpose. While adjudgmg the quantum of penalty, the adjudic a ting officer shall consider following factors, namely—(a) the amount of unfaü• advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of mvestors as a result of the default; (c) the æpetitive nature of the default. All sums realised by way of penalties under this Act shall be credited to the Consolidated Hand of India.

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