Depository Participants Archives

How to open an account with Depository Participants?

25th January 2019 by stocksbaazigar

Any investor who wishes to avail depository services must first open an account with depository participants of NSDL and CDSL The investor can open an account with any depository participant of NSDL and CDSL. An Investor may open an account with several DPs or he may open several accounts with a single DP. The investor has the freedom to choose a DP based on criteria like convenience, comfort, service level, safety, reputation, and charges. After exercising the choice, the investor has to enter into an agreement with the DP. Types of accounts with DP Types of depository account depend on the operations to be performed. There are three types of demat accounts which can be opened with a depository participants wiz. 1. Beneficiary Account 2.Clearing Member Account 3.Intermediary Account A DP may be required to open three categories of accounts for clients – Beneficiary account, clearing member account and intermediary account. A beneficiary account is an ownership account. The holder/s of securities in this type of account own those securities. A Clearing Member Account and Intermediary Accounts are transitory accounts. The securities in these accounts are held for a commercial purpose only. A Clearing Member Account is opened by a Broker or a Clearing Member for the purpose of settlement of trades. An Intermediary account can be opened by a SEBI registered intermediary for the purpose of stock lending and borrowing. Documents for Verification For the purpose of verification, all investors have to submit the following documents along with the prescribed account opening form. Proof of Identity – A beneficiary account must be opened only after obtaining proof of identity of the applicant. The applicant’s signature and photograph must be authenticated by an existing account holder by the applicant’s bank or after due verification made with the original of the applicant’s valid passport, voter ID, driving license or PAN Card with a photograph Proof of Address – The account opening form should be supported with proof of address such as verified copies of ration card/ passport/ voter ID/ PAN card/driving license/ bank passbook. An authorized official of Participants, under his signature, shall verify the original documents. In case any account holder fails to produce the original documents for verification within the aforesaid period 0f 30 days, it must be immediately brought to the notice of NSDL. Failure to produce the original documents within the prescribed time would invite appropriate action against such account holder, which would even include the freezing of their accounts Client Types in Depository System There are several client types in the depository system and different codes are allotted to them. These are listed below. 1)Resident – Ordinary and HUF 2)Financial Institutions – Govt sponsored FI, State FCs, other 3)FIIs – Mauritius-based, Others 4)NRI –Repatriable, Non-Repatriable, Depository Receipts 5) Body Corporate – Domestic Company, Overseas Corporate Body, Repatriable, Govt company, Central Govt, State Govt, Co-operative body, NBFC, Non- NBFC, Broker, Foreign Bodies, Group companies, others, OCB – Non-repatriable, Depository Receipt 6) CM (Clearing Member) 7) Foreign National – Foreign National/Depository Receipt 8) Mutual Fund – Foreign National/ Depository Receipt 9) Trust 10) Bank – Foreign Bank, Co-operative bank, Nationalized bank, Other 11) Intermediary These are several client types in the depository system and different codes are allotted to them as above. No minimum balance is required for opening a depository account. After verifying the form and the documents DP opens the account of their clients.

Depository system of India

29th January 201925th January 2019 by stocksbaazigar

Background: The earlier settlement system on Indian stock exchanges was very inefficient as it was unable to take care of the transfer of securities in a quick/speedy manner. Since the securities were in the form of physical certificates; their quick movement was again difficult. This led to settlement delays, theft, forgery, mutilation, and bad deliveries and also to added costs. To wipeout these problems, the Depositories Act 1996 was passed. It was formed with the purpose of ensuring free transferability of securities with speed, accuracy & security. It has been able to do so by: Making securities of public limited companies freely transferable, subject to certain exceptions. Dematerializing the securities in the depository mode. Providing for maintenance of ownership records in a book entry form. What is Depository? A depository is an institution or a kind of organization which holds securities with it in De-Mat form. In this, trading is done among shares, debentures, mutual funds, derivatives, F&O, and commodities. It is a company that maintains a record of investors dematerialized, shareholding in individual accounts, which are known as the demat account. Depositories in India Fundamentally, there are two sorts of depositories in India. National Securities Depository Limited (NSDL) Central Depository Service (India) Limited (CDSL). These are regulated by SEBI and are governed by the Depositories Act, 1996 NSDL: National Securities Depository Limited (NSDL) is an Indian Central securities depository based in Mumbai. It was established on 8 November 1996 as the first electronic securities depository in India with national coverage. It was established based on a suggestion by a national institution responsible for the economic development of India . CDSL: The second depository Central Depository Services Limited (CDSL) has been promoted by Bombay Stock Exchange and Bank of India. It was formed in February 1999. Both depositories have a network of Depository participants (DPs) which are further electronically connected to their clients. So, DPs act as a link between the depositories and the clients. What are the Depository Participants? Depository Participant (DP) is described as an Agent (law) of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act. Who can become Depository Participant? SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of Rs. 50 lakh for stockbrokers, R&T agents and non-banking finance companies (NBFC), for granting them a certificate of registration to act as DPs. If a stockbroker seeks to act as a DP in more than one depository, he should comply with the specified net worth criterion separately for each such depository. No minimum net worth criterion has been prescribed for other categories of DPs; however, depositories can fix a higher net worth criterion for their DPs. Services provided by Depositories: Dematerialization (usually known as demat) is converting physical certificates of Securities to electronic form Rematerialisation, known as re-mat, is reverse of demat, i.e. getting physical certificates from the electronic securities. Transfer of securities, change of beneficial ownership Settlement of trades done on exchange connected to the Depository Pledging and Unpledging of Securities for the loan against shares Corporate action benefits directly transfer to the Demat and Bank account of the customer

Primary market Intermediaries

21st January 201921st January 2019 by stocksbaazigar

Capital Market intermediaries are the important link between the regulators, issuer, and investor. SEBI has issued regulations in respect of each intermediary to ensure proper services to be rendered by them to the investors and the capital market. In this post, we will learn about some primary market intermediaries. The following market intermediaries are involved in the primary market: Merchant Bankers/Lead Managers Registrars and Share Transfer Agents Underwriters Bankers to the Issue Debenture Trustees etc. Merchant Bankers Merchant Bankers play an important role in the issue management process. Merchant Bankers are mandated by SEBI to manage public issues (as lead managers) and open offers in take-overs. Apart from these, they have other diverse services and functions. These include organizing and extending finance for investment in projects, assistance in financial management, acceptance house business, raising Euro-dollar loans and issue of foreign currency bonds. Lead Managers (Category 1 merchant bankers) has to ensure correctness of the information furnished in the offer document. They have to ensure compliance with the SEBI Rules and regulations and also guidelines for Disclosure and Investor Protection. To this effect, they have are to submit to SEBI a Due Diligence Certificate confirming that disclosures made in the draft prospectus or letter of offer are true, fair and adequate to enable the prospective investors to make a well-informed investment decision. Regulation: Merchant Bankers are one of the major intermediaries between the issuer and the investors, hence their activities are regulated by SEBI (Merchant Bankers) Regulations, 1992 Guidelines of SEBI and Ministry of Finance Companies Act 1956. Securities Contracts (Regulation) Act, 1956. and so on. Criteria for Merchant Banker: Regulation 3 of SEBI (Merchant Bankers) Regulations, 1992 lays down that the application by a person desiring to become merchant banker shall be made to SEBI in the prescribed form seeking a grant of a certificate of registration along with a non-refundable application fee as specified. The applicant shall be a body corporate other than NBFC The applicant has the necessary infrastructure like adequate office space, equipment’s and manpower to effectively discharge his activities. the applicant has in his employment a minimum of two persons who have the experience to conduct the business of the merchant banker. The applicant shall be a net worth of not less than 5 Crore rupees. The applicant, his director, partners, or principal officer is not involved in any litigation connected to securities market the applicant, his director, partner, or principal officer has not any time been convicted for any offence involving moral turpitude or has been found guilty of any offence. the applicant has the professional qualification from an institution recognized by the Government of Finance, Law or Business Management. the applicant is fit and proper person grant of certificate to the applicant is in the interest of investors Registrars and transfer agents R & T agents form an important link between the investor and issuer in the Securities Market. R & T agent is appointed by the issuer to act on its behalf to service the investors in respect of all corporate actions like sending out notices and other communications to the investors as well as dispatch of dividends and other non-cash benefits. R & T agents perform an equally important role in the depository system as well. R & T agents are registered with SEBI in the terms of SEBI (Registrars to the Issue and Share Transfer Agents) Rules and Regulations, 1993. Underwriters Underwriting services are provided by some large specialists financial institutions such as banks, insurance or investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee. Securities underwriting is the process by which investment banks raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equities and debt capital). The services are typically used during a public offering in the primary market. Underwriters are required to register with SEBI in terms of SEBI (Underwriters) Rules and Regulations, 1993. Bankers to the Issue Bankers to an Issue means a scheduled bank carrying on all of the following activities: acceptance of application and application money acceptance of allotment of call money refund of application money Payment of dividends or interest warrants etc. The activities of the Banker to an issue in the Indian Capital Market are regulated by SEBI (Bankers to an issue) Regulations, 1994 Debenture Trustees Debenture Trustee means a Trustee of a Trust deed for securing any issue of debentures. Debenture trustees call for periodical reports from the body corporate takes possession of trust property in accordance with the provisions of the trust deed enforce security in the interest of debenture holders do such acts as necessary in the event the security becomes enforceable carry out such acts as are necessary for the protection of debenture holders and to do all things necessary in order to resolve the grievances of the debenture holders. ascertain and specify that debenture certificates have been discharged within 30 days of registration of the charge with ROC ascertain and specify that debenture certificates have been discharged in accordance with the provisions of the Company Act ascertain and specify that interest warrants for interest due on the debentures have been dispatched to the debenture holders on or before the due date and so on. To inform SEBI in case of breach of Trust Deed and take measures accordingly. The activities of Debenture Trustee in the Indian Capital Market are regulated by SEBI (Debenture Trustees) Regulations, 1993.