Lecture - Depository Participants v2.0

Depository Participants
PART - I
Presented by:Mr. Vinay Mahajan Assistant General Manager & Compliance Officer
8/6/2013
Ludhiana Stock Exchange
Constituents of a DP System
o o o o o o o
DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY
REGISTRAR AND TRANSFER AGENT

CLEARING CORPORATION/ CLEARING MEMBER STOCK BROKERS INVESTORS
8/6/2013
o o o o o o o

8/6/2013
Depository Means
o
A place where a deposit of securities is deposited for safekeeping agreement. under the terms of depository
In Capital Markets terms it is an institution which

deals in securities as a bank deals in funds.
8/6/2013
Is Depository system better??

o
Before introduction of Depository system, the problems faced by investors and corporate in handling large volume of paper were as follows:
o
Bad deliveries and Loss of certificates in transit
o
o o o
Fake certificates and Mutilation of certificates

Delays in transfer and Long settlement cycles Mismatch of signatures Delay in refund and remission of dividend etc
8/6/2013
Bank vs Depositories
8/6/2013
Interface of Investor with Depository

Investor
Submits Demat Application Form Account Statement evidencing Receives Contacts client DP and identification Opens accounts number Allotment
DP
Sends Allotment advice
Investor Eligible to Trade Bank

Informs
RTA
8/6/2013
Depositories is for safe keeping

o
Its a company formed and registered under Companies Act, 1956 Holds securities of share holders in electronic form Arranges for transfer of ownership of securities Facilitates Dematerialization and Rematerialization processes Currently there are two Depositories in India National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL)
Ludhiana Stock Exchange 8
o o o
8/6/2013
About NSDL and CDSL
8/6/2013
Legal Frameworks related to Depositories

Primary Rules
o o o o
Depositories Act, 1996 SEBI (Depositors and Participants) Regulations, 1996 Bye-laws approved by SEBI Business Rules framed regulations and bye-laws in accordance with the
Other Acts
o
Companies Act 1956; Indian Stamp Act 1989; SEBI Act 1992; Securities Contract (Regulation Act) 1956; Borrowers Transaction (Prohibition) Act 1988; Income Tax Act 1961 and Bankers Book Evidence Act 1981
8/6/2013
o o o o o o o

8/6/2013
11
DP: An agent of the Depository

o o o o
Interface between depository and investors Regulated by SEBI Should have minimum Net Worth of Rs. 1crore Following categories are eligible to become a DPo
Financial institutions like Banks (Indian or international), State financial corporations SEBI registered custodian of securities
o
o o
8/6/2013
Clearing corporations of stock exchanges

SEBI registered stock broker or R&T Agent Non-Banking Financial Companies
DP: Basic Eligibility Criteria

o
Following categories are eligible to become a DP:

o o o o o o o o o o
Public financial institution.

Bank Foreign bank operating in India with approval of the RBI State Financial Corporation. Institution engaged in providing financial services SEBI registered Custodian of securities Clearing corporation or a clearing house of a stock exchange. SEBI registered Stockbroker. Non-Banking Finance Company (NBFC). SEBI registered R&T agent
8/6/2013
Eligibility Criteria on basis of Net worth

Category
As per SEBI Stock Broker/NBFC RTA NBFC (on behalf of others) As per NSDL and CDSL Stock Broker/NBFC RTA NBFC (on behalf of others
Minimum Networth
50 Lakhs 10 Crore Additional Networth of Rs. 50 Crore
Rs. 200 Lakhs for all the categories
8/6/2013
14
DP: Steps for joining

o
Application to Depository and its verification by Depository. Grant of approval to the application by depository Applicant establishes electronic connectivity with depository. Recommendation to SEBI by depository. Grants of in-principle approval by SEBI, if found satisfactory.
o o
o o
8/6/2013
15
DP: Steps for joining contd

o
Payment of registration fees to SEBI and security deposits, insurance charges and other collateral to depository Execution of agreement between DP and depository. Grant of Registration Certificate by SEBI. Activation of DP module Start of DP Operations
o o o
8/6/2013
DP: Conditions for grant of certification

The Applicant :
o
o
Have adequate infrastructure and systems.

Redress the grievance of beneficial owners within 30 days of the date of receipt of the complaint and keep the depository informed about the number and nature of redressals. Furnish information and details of its business history for a minimum period of three years.
Not have been convicted in any of the five years immediately preceding the filing of the application in any matter involving misappropriation of funds and securities, theft, embezzlement of funds etc.
8/6/2013
Conditions for grant contd

Not have been expelled, barred or suspended by SEBI. have minimum networth of Rs. 1 crore. Furnish details of its Board of Directors/ authorised officials, who would be responsible for acting in behalf of DP. Make adequate arrangements for conducting effective and safe depository operations. Depository may conduct entrance examinations to examine the knowledge of DP (and its staff). Depository may make it mandatory to appoint a Compliance Officer. Depository requires at least one person in each DP Service Centre must be qualified in NCFM (NSEs certification in Financial Markets)- Depository Operations Module
8/6/2013
DP Certificate is suspended when

o
Contravened any of the provisions of the Depositories Act, 1996 Bye-Laws. Failed to furnish any information relating to its activity. Not furnished information called for by SEBI. Furnishing information which is false or misleading. Not co-operated in any inspection or investigation or enquiry conducted by SEBI.
o o o o
o
o
Failed to comply with any direction of SEBI.

Failed to pay the annual fee.
8/6/2013
DP Certificate is cancelled when

1.
DP is guilty of fraud, or has been convicted of an offence involving moral turpitude.
2.
DP has been guilty of repeated defaults specified for suspension of registration.
8/6/2013
20
o o o o o o o

8/6/2013
21
Issuers and RTAs

o
An Issuer of share is the company which had launched its shares in the market via IPO Registrar and Transfer Agents(RTA) are appointed by Issuer companies to act on their behalf.
RTA is a trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances and transactions, to cancel and issue certificates, to process investor mailings and to deal with any associated problems
8/6/2013
o o o o o o o

8/6/2013
23
Clearing Corporation / Clearing Member

o
A clearing corporation is an independent central organisation created to facilitate efficient, fast and economical settlement of transactions at SE. It acts as a central mechanism for consolidating and settling transactions instead of the member firms settling each trade individually amongst themselves. The members of Clearing Corporation are called as clearing members. Eg: All trades done at NSE are settled through National Securities Clearing Corporation Limited (NSCCL)
8/6/2013
o o o o o o o

CLEARING CORPORATION/ CLEARING MEMBER STOCK EXCHANGES/STOCK BROKERS INVESTORS
8/6/2013
25
STOCK EXCHANGES / STOCK BROKERS

o
Stock Exchange (SE) is an organised market for dealings in securities commonly referred as secondary market. One of its main functions is price discovery i.e to cause prices to reflect currently available information about a security. Stock Brokers (SB) are members of SE primarily engaged in 2 main activities i.e buy and sell securities for their clients charging a commission and as dealers or traders they buy and sell on their own account for trading gains.
8/6/2013
26
o o o o o o o

CLEARING CORPORATION/ CLEARING MEMBER STOCK EXCHANGES/STOCK BROKERS INVESTORS
8/6/2013
27
Investors
o
May be individuals or corporate who have acquired shares either in primary market or in secondary market
8/6/2013
28
BENEFITS of DP SYSTEM
8/6/2013
29
Benefit to Investors
o
Eliminates bad deliveries and stamp duty transfer of shares Effects immediate transfer of securities and faster settlement trade and cycle. Reduces handling huge volumes & transaction costs which leads to convenient portfolio management Eliminate all risks of physical certificates like loss, theft mutilation, forgery Elimination of problems like change of address, transmission, nomination etc.
8/6/2013
Benefit to Companies
o o o o o
Reduction in huge paperwork. Less requirement of manpower. Reduction in time and cost. Increase in efficiency and effectiveness. Easy availability of shareholding.
o
o
8/6/2013
Easy capital restructuring.

Quick and easy corporate actions.
Benefit to Nation
o o
Growing and more liquid markets Increase in competitiveness in the international market place attracting many investors Improved prospects for privatisation of public sector units by creating a conducive environment Considerable reduction in delay
Minimises settlement risk and fraud restoring investors faith in the capital markets
8/6/2013
Some good and bad practices related to DP System
8/6/2013
33
Recommended Actions
o
Ensure both holding and transaction statements are received periodically as instructed to DP. Check statement on receipt. Contact DP for clarification unauthorized debits or credits. in case of any
o o
Inform DP in case of change in address, telephone number etc. as early as possible. While sending securities for demat, record the distinctive numbers of the securities sent. Check the demat performance of the issuer company with DP before sending certificates for demat
8/6/2013
Recommended Actions Contd..

o
Just like a cheque book, keep your delivery instruction slip(DIS) book in safe custody. Accept the DIS book from DP only if each slip has been prestamped with a serial number and demat account number. Always mention details like ISIN, number of securities accurately. If in doubt, contact DP or broker. Authorize any corrections, over- writing or cancellations on the instruction slips by signing against the same. Ensure that all joint holders of the demat account sign the slip. If there is space for multiple instructions and it is not used fully, strike out the blank space for furnishing securities details.
o o
8/6/2013
Latest Developments in DP System

o
Details of PAN made compulsory w.e.f. 01.12.2006.
ISINs to be activated only after commencement of trading on the stock exchanges.

Thru Internet, clients can view and transfer their holding from anywhere. Clients can see their value of holding daily. KYC In Capital Market
o o
o
o
RGESS (RAJIV GANDHI EQUITY SAVING SCHME)

BSDA (BASIC SERVICE DEMAT ACCOUNT)
8/6/2013
Gaps in DP System
o o o
Different DPs charge different amounts. Some DPs also take hidden charges. Account Maintenance charges are high.
o
o
Adds to extra burden of account holder.

More than one account for one person leads to mis-utilizing the DP systems. DP system has also resulted in thefts etc
8/6/2013
37
Depository Participants
PART - II
Presented by:Mr. Jaswinder Singh Sr. Officer DP Operations
8/6/2013
38
Type of Accounts
ACCOUNT
BENIFICIARY A\C
CLEARING MEMBER A\C
INTERMEDIARY A\C
HOUSE
NON-HOUSE
39
Accounts Characteristics
BENIFICIARY A\C CLEARING MEMBER A\C Holder of securities own the securities Opened by a broker or a clearing member for the purpose of settlement of trades.
Opened by a SEBI registered intermediary for the purpose Of stock lending and borrowing.
40
INTERMEDIARY A\C
Client Types

RESIDENT - Ordinary, HUF Financial Institutions- Government-sponsored FI, State Financial Corporation FIIs - Mauritius-based, Others NRI - Repatriable (NRE), NonRepatriable(NRO), Depository Receipt Body Corporate CM (Clearing Member) Mutual Fund - Depository Receipt Trust Bank Intermediary
41
Common Details

NAME OF THE HOLDER DATE OF BIRTH (FOR INDIVIDUALS) OCCUPATION, INCOME RANGE ADDRESS AND PHONE NUMBER, EMAIL ID BANK DETAILS PAN NUMBER DETAILS OF NOMINATION SPECIMEN SIGNATURES
42
Some Major Functions
8/6/2013
43
COMMON REQUIREMENTS FOR OPENING DEMAT ACCOUNT
KYC form In person verification with original documents all holder Identification proof Address proof Photograph of applicant Agreement Nomination form Bank Details PAN Introduction by existing Account holder
44
ADDITIONAL REQUIREMENTS FOR CORPORATE APPLICANTS
Copy of Board Resolution List of Auth. Sign. & List of Directors Copy of Memorandum and Articles of Association Introduction by existing account holder or by applicants bank
45
DOCUMENTS FOR VERIFICATION

PROOF OF IDENTITY

Passport
PROOF OF ADDRESS
Ration Card
Passport
Voter Id Card Driving License PAN Card photograph with
Voter Id Card Driving License Bank Passbook Verified Copies of Electricity bills, residence telephone bills, lease and license agreement, agreement for sale. Self declaration by High Court and Supreme Court Judges. Identity Cards issued as above.
Identity Card/documents issued with applicants photograph issued by Central/ State Govt. & its Departments/ Statutory/ Regulatory Authorities/ Public Sector Undertakings/ Scheduled Commercial Banks/ Public Financial Institutions/ Professional Bodies/ Credit Cards/ Debit Cards issued by Banks
46
DEMAT Process
o
Conversion of Securities from Physical (Paper) Mode to Electronic Mode is Called Dematerialisation. The Client can open Demat Account with any DP. Upon Demat, the Certificates are destroyed and credit entry of exactly equal number of Securities is created in Depository in Electronic mode. The B.O. account of holder is credited. The securities loose their identities.
o o
o o
8/6/2013
47
DEMAT Process
o
Securities that can be Demated:

1. 2.
Shares, bonds, debentures. Units of mutual funds,
3.
4.
Certificate of deposit,
Unlisted securities
8/6/2013
48
DEMAT Process
Shareholder
With Physical Certificate
DP
Shareholder goes to DP with physical share certificates
Account Opening
Shareholder opens account with DP
R&T Agent
DP sends share certificates to R&T agent for dematerialisation
Dematerialization
Upon confirmation of Demat by R&T agent, the depository confirms dematerialization
Demat Request Form (DRF)

Shareholder files DRF in duplicate, defaces the shares and hands it over to DP
Depository
DP sends information electronically to Depository
Credit the BO A/c Of the Investor

8/6/2013 Ludhiana Stock Exchange 49
REMAT Process
o o
Reverse of Demat Issuance of physical securities in place of the securities held electronically in book-entry form with a depository. Electronic holding can be converted into physical holding at any time.
8/6/2013
50
NOMINATION
o
Under this provision, any investor can nominate a person, in whom the securities would vest, in the event of original investors death. Nomination can be made/Cancelled/Changed at any time by Individuals only. In case of Joint holding all joint holders to sign nomination form. The Nominee shall not be a trust, society, body corporate, partnership firm, karta of Hindu Undivided Family or a power of Attorney holder. A non-resident Indian can be a Nominee, subject to the exchange controls in force, from time to time. A minor can be nominated. Transfer of securities in favour of a Nominee shall be valid discharge by the Depository against the legal heir.
o o
o o
8/6/2013
TRANSMISSION
o o
Transmission" means devolution of title to shares by Death.
Transmission is different from Transfer as Transfer refers to voluntary act whereas Transmission refers to an act brought by operation of law.
Transmission can be of two forms based on number of security holders
1. 2.
Single Holding Joint Accounts
Transmission can be of two forms based on type of holding

1.
2.
Physical Holding
Demat Holding
8/6/2013
52
Transmission Based on Holdings

o
Procedure for Physical Holding

o
o
Documents are sent to company for effecting transmission.

If deceased shareholder had holdings in several companies, the relevant documents must be sent to each company. Survivors have to follow-up with each company in order to get the transmission effected before the book closure.
Procedure for Demat Holding

o o
Successor to the title interacts only with one entity, his DP. DP does the entire act of transmission and the process made easy. Transmission can be for sole holding cases as well as for joint holdings.
8/6/2013
Transmission Based on Number of holders

o
Single Holding Cases

o
If valid nomination has not been made, the claimants/ successors/legal heirs of the deceased can get the securities transmitted in their favour.
A request to DP is made along-with copy of death certificate and succession certificate/court order/Probate or Letter of Administration duly notarised.
In case holding is less than Rs 1Lac, copy of death certificate alongwith letter of indemnity, an affidavit and NOC from all legal heirs will be sufficient
Joint Holding Cases

o
The surviving Joint holders can get securities transmitted in their favour. Notarised copy of Death certificate required. New Account to be in same order of names of surviving holders as old one.
o o
8/6/2013
Transposition-cum-demat
If the names of the clients appearing on the security certificates match with the names in which the account has been opened but are in a different order, such securities can be dematerialized.
8/6/2013
55
The Participant shall forward the DRF to the Issuer or its Registrar & Transfer Agent. RTA ascertains that the number of certificates annexed with the DRF tallies with the number of certificates mentioned on the DRF. In case of transposition/transmission and dematerialization cases, the Participant shall also forward Annexure OA/OB alongwith the DRF to the Issuer or RTA.
8/6/2013
56
The dematerialised securities shall be credited to the accounts maintained by a Participant only when the pattern of holdings in the account of the Client matches with the pattern of holdings as per the security certificates.
In cases where the names appearing on the certificates match with the names in which the account has been opened but are in a different order, the Client can get the security certificates dematerialised by submitting the security certificates along with the Transposition Form as per Annexure OA and the Dematerialisation Request Form (DRF) to the Participant.
8/6/2013
57
Corporate Actions
o
These are the events which affect the rights, obligations and/or interests of the B.O. of the securities held in a DP The examples are payment of interest, dividend, bonus shares, rights, splits, merger, redemption, call money, liquidation etc Type of corporate actions
o o
Monetary Benefits like dividends, interest etc Non-Monetary Benefits like bonus right shares, split and consolidation of shares etc
8/6/2013
Corporate Actions Process

o o
Announcement of Corporate Actions. Information by R&T Agent to Depository about the proposed corporate action.
Information by Depository to all DPs about the corporate action & the cut-off date and procedure to be followed. Update of BO details well in advance by DP i.e. tax status, bank details, address change etc
8/6/2013
Corporate Actions Process Contd..

o
Submission of B.O. details by Depository to the issuer company or its R&T Agent. Transfer of all holding in transit a/c to BO A/c.
o o
Distribution of dividend, interest and other monetary benefits directly to the beneficial owners. Issue of statement by DP to clients.
8/6/2013
60
Pledge / Hypothecation
o
Securities that are in demat mode can be pledged and hypothecated against a loan, credit or otherwise. There is an agreement between and pledgee and both must have demat account but need not with same DP. A lender of securities through depository system is entitled to all corporate benefits in respect of the securities lent by him. Intermediary collects the value of lender's entitlement to the corporate benefits from the borrower and pays the same to the lender
8/6/2013
Other Functions
o o
Freeze and Unfreeze Modifications [Bank details, Address Change, Change of Nomination, SMS Alert]
o o
Billing, Compliance & Audits

Holding, transactions & Modification Letters sent to clients. Account Closure.
8/6/2013
ISIN
8/6/2013
63
International Securities Identification Number (ISIN)

o
Issued by International Standards Organisation (ISO) member countries in accordance with ISO 6166. ISIN is 12 digit alpha numeric number. It has three components, prefix, basic & check digit.
o o
o
o
Prefix is a two letter country code i.e. IN for India.

The basic characters. number has nine alpha numeric
The last digit is check digit. It ensures the ISIN is valid.
8/6/2013
64
Components of ISIN
Characters First two 3rd Meaning Country Code Category Company Serial 4th till 7th Number 8th and 9th Security Code Issue Serial 10th and 11th Number 12th Check Digit Example IN E 475C 01 01 2
The overall ISIN Code is - INE475C01012
8/6/2013
65
RGESS
o
RGESS benefits will be available upto Rs. 50,000, Investment any amount. Help in promoting an equity culture in India. Improve the depth of domestic capital markets. The top 100 stocks at NSE and BSE i.e., CNX-100 / BSE -100 Stocks of public sector enterprises like,
o o
Maharatna, Navaratna and Miniratna.
8/6/2013
66
RGESS VS ELSS
ELSS
Investments are in mutual funds 100% deduction (upto Rs. 1,00,000) is allowed under ELSS The ELSS benefit is coming under Section 80C of the IT Act which has an aggregate limit of Rs. 1,00,000 for all such eligible instruments like LIC policy, PPF etc Lock-in period of 3 years
RGESS
Investment in top BSE 100 & top NSE 100 Only 50% deduction (upto max. of Rs. 25,000) is allowed under RGESS. RGESS deduction is available under Section 80CCG. This is a separate investment limit exclusively for RGESS, over and above the Section 80C Limit Lock-in period of 3-years. However, trading allowed after one-year, subject to conditions. Since investments are in equity / risk / ownership capital, risk is perceived to be higher
67
Since investments are in mutual funds, it is perceived to be less risky
8/6/2013
BASIC SERVICES DEMAT ACCOUNT
A special category of demat account which can be opened by only individual investors. Only one account can be opened under BSDA Category, where the investor is a first / sole holder. SMART registration is mandatory for BSDA accounts.
8/6/2013
68
Annual Maintenance charge (BSDA)
No AMC shall be levied, if the value of holding is up to Rs. 50,000. Value of holding from Rs 50,001 to Rs 200,000, AMC not exceeding Rs 100 may be charged. Value of holding in such BSDA exceeds Rs. 200,000 at any date, the DPs may levy charges as applicable to regular accounts (non-BSDA) from that date onwards.
8/6/2013
THANK YOU
8/6/2013
70

Lecture - Depository Participants v2.0

Transféré par

Informations du document

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Lecture - Depository Participants v2.0

Transféré par

Droits d'auteur :

Formats disponibles

Depository Participants

Ludhiana Stock Exchange

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

In Capital Markets terms it is an institution which

Ludhiana Stock Exchange

Is Depository system better??

Bad deliveries and Loss of certificates in transit

Fake certificates and Mutilation of certificates

Ludhiana Stock Exchange

Ludhiana Stock Exchange

Interface of Investor with Depository

Investor Eligible to Trade Bank

Ludhiana Stock Exchange

Depositories is for safe keeping

About NSDL and CDSL

Ludhiana Stock Exchange

Legal Frameworks related to Depositories

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

DP: An agent of the Depository

Clearing corporations of stock exchanges

DP: Basic Eligibility Criteria

Following categories are eligible to become a DP:

Public financial institution.

Eligibility Criteria on basis of Net worth

Rs. 200 Lakhs for all the categories

Ludhiana Stock Exchange

DP: Steps for joining

Ludhiana Stock Exchange

DP: Steps for joining contd

DP: Conditions for grant of certification

Have adequate infrastructure and systems.

Conditions for grant contd

DP Certificate is suspended when

Failed to comply with any direction of SEBI.

DP Certificate is cancelled when

DP is guilty of fraud, or has been convicted of an offence involving moral turpitude.

DP has been guilty of repeated defaults specified for suspension of registration.

Ludhiana Stock Exchange

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

Issuers and RTAs

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

Clearing Corporation / Clearing Member

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

STOCK EXCHANGES / STOCK BROKERS

Ludhiana Stock Exchange

DEPOSITORIES DEPOSITORY PARTICIPANTS ISSUER OF SHARES OR COMPANY

REGISTRAR AND TRANSFER AGENT

Ludhiana Stock Exchange

Ludhiana Stock Exchange

Ludhiana Stock Exchange

Easy capital restructuring.