Dp

Depository Services

Depository  A depository is an organization where the securities of an investor are held in electronic form, at the request of the investor through the medium of a Depository Participant  If an investor wants to utilize the services offered by a depository, he has to open an account with the depository through its Depository Participant. This is similar to opening an account with any of the branches of a bank in order to utilize the services of that bank.

What is dematerialization?  It is process of converting securities from physical form into electronic form.

Depositories in Indian context  Central Depository Services (India) Limited - Promoted by BSE, BoI, BoB, SBI and HDFC Bank.  National Securities Depository Limited (NSDL) - Promoted by UTI, IDBI and NSE  Securities and Exchange Board of India (SEBI) is the regulating authority.

Depository-Bank-An Analogy

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Bank Holds funds in accounts Transfers funds between accounts Transfers without handling cash Safekeeping of money

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Depository Holds securities in accounts Transfers securities in accounts Transfers without handling physical securities Safekeeping of securities

Who is a Depository Participant?  A Depository Participant (DP) is an agent of the depository and is authorized to offer depository services to investors.  According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. can become DP with a depository.

Role of a DP  A DP is interface between customer and depository.  A customer opens an account with a DP and commences operations.  Balances are maintained with the depository and are available through the DP.  DP will intimate customers status of holdings or transactions from time to time.

Services offered by DP     

Account Opening & Maintenance Dematerialisation of Securities Transfer of Securities Pledging of Securities Rematerilisation of Securities

Account Types Beneficiary Account These are ownership accounts, for use of Individuals, Corporates, HUFs etc. Pool Account These are commercial accounts , for use of broker, for transfer of securities to and fro, from Exchange or Clearing Corporation. All the securities received in the pool account should be transferred to the respective beneficial accounts within 24 hrs.

Can any security be dematerialized?  Only securities eligible for demat.  Only securities registered in the name of account holder.  Name(s) and order of name appearing on the certificate should match with that of account holders. However, initial of first / middle name is acceptable.  Signature should match with that in the records of registrar.

How are securities dematerialized?  Physical securities are to be submitted to DP,along with DRF.  Each security certificate should be defaced by the client. Defacing of certificate to be done by putting a stamp ‘Surrendered for Dematerialization’.

Demat Requisition Form

Demat Requisition Form

Dematerialization process  Client submits DRF and physical certificates to DP.  DP intimates to depository and sends certificates with DRF to R&T agent.  R&T agent confirms dematerialization to depository.  NSDL credits securities to beneficial owner.

Dematerialization Process

 How many copies of DRF are made and who all get them? 

3 Copies  Client / Account Holder  Depository participant  R & T agent

Trading & Settlement  Market Trade Trade done through a broker on the exchange. Has to be settled through the exchange  Off Market Trade Trade done between two parties without the involvement of a broker. Has to be settled mutually between the two parties, shares moves from one account to another

Delivery Instruction Slip

Settlement of Market Trade  Seller gives delivery instructions to DP to move securities to broker’s account.  Securities are transferred to clearing corporation from brokers account.  On pay out securities are moved from Clearing corporation to buying broker’s account.  Buying broker credits buyer’s account.

Off Market Trade  Seller gives Delivery Instruction to his DP.  Securities are transferred from seller’s DP to Buyer’s DP.  Buyer gets credit automatically into his account

Pledge Securities held in a depository account can be pledged to avail of loan/credit facility. Pledge of securities in NSDL depository requires that both the borrower (pledgor) and the lender (pledgee) should have account in NSDL Depository.

Corporate Action  Corporate events which affect the rights, obligations and / or interests of beneficial account holders.  These events can have monetary and nonmonetary repercussions.

Corporate Action Monetary  On the record date NSDL, downloads clients details and send it to the registrar.  The Registrar disburses the benefit to the beneficial holder as per the details obtained from NSDL Non Monetary  On the record date, NSDL downloads clients details and send it to the registrar  The Registrar give credit to the beneficial holder as per the details obtained from NSDL

Who can open a demat account?  Individuals,NRIs,Minors,HUFs,Trusts (Regd), Corporates can open demat account.  Proprietary firms,partnership firms and unregistered trusts cannot open a demat account as the Companies Act,1956 prohibits these entities from becoming shareholders of companies

Basic documents for account opening

 Registration form  Photograph/s with signatures across it  Proof of residence Passport,Voter’s ID card,Driving license,Ration card  Proof of identity Passport,Voter’s ID card,Driving license,PAN card  Bank Account Proof Bank statement,cancelled cheque

Charges for Depository Account

 Account opening charges  Annual service charges  Custody / Holding charges  Transaction Credit  Transaction Debit

 Nil  Rs.250/(charged pro rata)  Nil  Nil  0.05% of transaction value (Minimum Rs.15/Maximum Rs.100/-)

Charges for Depository Account  Pledge creation charges  Pledge closure charges  Dematerialisation charges  Rematerialisation charges  Rejection / Failure charges

 Rs.30/- per instruction  Nil  Rs.5/-per certificate,Rs.25/(per request for postal charges)  Rs. 15/-per certificate, Rs.25/(per request for postal charges)  Rs.20/- per entry.

Notes to schedule of charges  Exclusive depository customers will pay in advance Rs.1000/- per account,adjustable against service charges.  All the above charges are exclusive of service tax.  Charges / service standards are subject to revision at the depository participant’s sole discretion.  Annual service charges are non refundable and are levied upfront on a pro rata basis.  Value of transaction will be in accordance with rates provided by depository.  Transaction charges are payable monthly. …contd.

Notes to schedule of charges  In case of non maintenance of adequate balance in the trading or demat account, service for the account is temporarily discontinued.  Request for resuming service is charged Rs. 250/- .  Any service not quoted above ,will be charged separately.

Frequently Asked Questions

Is it compulsory for every 5paisa customer to open a depository account with IIL?

Yes. This is so because we give our clients exposure to trade against the stocks held in their demat account provided we have a POA

How many different DP accounts can I have?

You can have as many DP accounts as you want.

Do I need to keep a minimum stock balance in a DP account?

No. There can be a zero stock balance in a DP account.

Do I need to open different DP accounts for shares held in my name with variations. For example, the shares are in my name as follows:

 Rohit Gupta  R Gupta  Rohit G

No. If the identity that all the three names belong to the same person, then customer can have one DP account.

If Mr. A has a joint holding with Mr. B . There are some shares with A as first holder and B as the second holder and vice versa. Can Mr.A and Mr.B dematerialise shares into a single joint account?

Yes.They can dematerialise shares in a single joint using transposition form.

Can someone else operate my account on my behalf on the basis of a power of attorney?

Yes. If you authorize any person to operate your account by executing a power of attorney and submit it to DP, that person can operate the account on your behalf.

Why should I give my bank account details at the time of account opening?

It is for protection of your interest. Your bank account number will be mentioned on the interest or dividend warrant you are entitled to so that such warrant cannot be encashed by any one else. Further, a DP cannot open the account if bank account number is not given.

Can I operate a joint account on "either or survivor" basis just like a bank account?

No. The demat account cannot be operated on "either or survivor" basis like the bank account.

Thank You