Q. What is a Depository? |
A depository is an organization, which holds securities of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities. |
Q. How is a depository similar to a bank? |
| It can be compared with a bank, which holds the funds for depositors. A Bank – Depository Analogy is given in the following table: BANK-DEPOSITORY – AN ANALOGY - BANK Holds funds in an account. DEPOSITORY Hold securities in an account. - BANK Transfers funds between accounts on the instruction of the account holder. DEPOSITORY Transfers securities between accounts on the instruction of the account holder. - BANK Facilitates transfer without having to handle money, DEPOSITORY Facilitates transfer of ownership without having to handle securities. - BANK Facilitates safekeeping of money, DEPOSITORY Facilitates safekeeping of securities. |
Q. How many Depositories are registered with SEBI? |
| At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (I) Limited (CDSL) are registered with SEBI. |
Q. Who is a Depository Participant? |
| A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor. A DP can offer depository services only after it gets proper registration from SEBI. Banking services can be availed through a branch whereas depository services can be availed through a DP. |
Q. Is it compulsory for every investor to open a depository account to trade in the capital market? |
As per the available statistics at BSE and NSE, 99.9% settlement takes place in demat mode only. Therefore, in view of the convenience in settlement through demat mode, it is advisable to have a beneficiary owner (BO). |
Q. Account Opening : Am I eligible to open an Account? |
Yes, any Individual, Hindu undivided Family (HUF), proprietary firm, partnership firm, company, trust or Non Resident Indians (NRI) can open an account with Krishna Multifarious consultancy private limited (KMC). |
Q. Account Opening : What should I do when I want to open an account with a DP? |
| At the time of opening an account, you have to sign an agreement with the DP in a NSDL prescribed standard agreement, which details your and your DP’s rights and duties. You have to submit required documents to open account opening form as per KYC(Know Your Customer) norms. |
Q. Account Opening : Can I open more than one account with the same DP? |
Yes. You can open more than one account with the same DP. There is no restriction on the number of accounts you can open with a DP. |
Q. Account Opening : Am I restricted to having account with only one DP? |
No. There are no restrictions on the number of DPs you can open accounts with. Just as you can have savings or current accounts with more than one bank, you can open accounts with more than one DP. |
Q. Account Opening : Why should an investor give his bank account details at the time of account opening? |
It is for the protection of investor’s interest. The bank account number will be mentioned on the interest or dividend warrant, so that such warrant cannot be encased by any one else. Further, cash corporate benefits such as dividend, interest will be credited to the investors account directly through the ECS (Electronic Clearing Service) facility, wherever available, by the company. |
Q. Account Opening : Why should I/We as BO should show my income level? |
It is a mandatory requirement from CDSL |
Q. Account Opening : Can an investor change the details of his bank account? |
Yes. Since in the depository system monetary benefits on the security balances are paid as per the bank account details provided by the investor at the time of account opening, the investor must ensure that any subsequent change in bank account details is informed to the DP. |
Q. Account Opening : What should be done if the address of the investor changes? |
Investor should immediately inform his/her DP, who in turn will update the records. This will obviate the need of informing different companies. |
Q. Account Opening : Does the investor have to keep any minimum balance of securities in his/her accounts? |
No. |
Q. Account Opening : Can an investor open a single account for securities owned in different ownership patterns such as securities owned individually and securities owned jointly with others? |
No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is in the individual name and another certificate is jointly with somebody, two different accounts would have to be opened. |
Q. Account Opening : What is required to be done if one has physical certificates with the same combination of names, but the sequence of names is different i.e. some certificates with ‘A’ as first holder and ‘B’ as second holder and other set of certificates with ‘B’ as first holder and ‘A’ as the second holder? |
In this case the investor may open only one account with ‘A’ & ‘B’ as the account holders and lodge the security certificates with different order of names for dematerialization in the same account. An additional form called "Transposition cum Demat" form will have to be filled in. This would help you to effect change in the order of names as well as dematerialize the securities. |
Q. Account Opening : Can an investor 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. |
Q. Account Opening : Can someone else operate the account on behalf of the BO on the basis of a power of attorney? |
Yes. If the BO authorizes any person to operate the account by executing a power of attorney and submit it to the DP, that person can operate the account on behalf of the BO. |
Q. Account Opening : Can addition or deletion of names of accountholders is permitted after opening the account? |
No. The names of the account holders of a BO account cannot be changed. If any change has to be effected by addition or deletion, a new account has to be opened in the desired holding pattern (names) and then transfer the securities to the newly opened account. The old account may be closed. |
Q. Account Opening : Can an investor close his demat account with one DP and transfer all securities to another account with another DP? |
Yes. The investor can submit account closure request to his DP in the prescribed form. The DP will transfer all the securities lying in the account, as per the instruction, and close the demat account. |
Q. Account Opening : Whether investors can freeze or lock their accounts? |
Investors can freeze or lock their accounts for any given period of time, if so desired. Accounts can be frozen for debits (preventing transfer of securities out of accounts) or for credits (preventing any movements of hindrances into accounts) or for both. |
Q. Account Opening : What is Dematerialization ? |
Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited into the investor's account with his/her DP. |
Q. Account Opening : How can one convert physical holding into electronic holding i.e. how can one dematerialize securities? |
In order to dematerialize physical securities one has to fill in a DRF (Demat Request Form) which is available with the DP and submit the same along with physical certificates one wishes to dematerialize. Separate DRF has to be filled for each ISIN Number. The complete process of dematerialization is outlined below: • Surrender certificates for dematerialization to your depository participant. • Depository participant intimates Depository of the request through the system. • Depository participant submits the certificates to the registrar of the Issuer Company. Registrar confirms the dematerialization request from depository. • After dematerializing the certificates, Registrar updates accounts and informs depository of the completion of dematerialization. • Depository updates its accounts and informs the depository participant. • Depository participant updates the demat account of the investor. |
Q. Account Opening : What is an ISIN? |
ISIN (International Securities Identification Number) is a unique identification number for a security. |
Q. Account Opening : Can odd lot shares be dematerialized? |
Yes, odd lot share certificates can also be dematerialized. |
Q. Account Opening : Do dematerialized shares have distinctive numbers? |
Dematerialized shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. |
Q. Account Opening : Can electronic holdings be converted back into Physical Certificates? |
Yes. The process is called rematerialisation. If one wishes to get back his securities in the physical form one has to fill in the RRF (Remat Request Form) and request his DP for rematerialisation of the balances in his securities account. The process of rematerialisation is outlined below: • One makes a request for rematerialisation. • Depository participant intimates depository of the request through the system. • Depository confirms rematerialisation request to the registrar. • Registrar updates accounts and prints certificates. • Depository updates accounts and downloads details to depository participant. • Registrar dispatches certificates to investor. |
Q. Trading/Settlement : What is the procedure for selling dematerialized securities? |
The procedure for buying and selling dematerialized securities is similar to the procedure for buying and selling physical securities. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities. In case of purchase:- • The broker will receive the securities in his account on the payout day • The broker will give instruction to its DP to debit his account and credit investor's account • Investor will give ‘Receipt Instruction to DP for receiving credit by filling appropriate form. However one can give standing instruction for credit in to ones accounts that will obviate the need of giving Receipt Instruction every time. In case of sale:- The investor will give delivery instruction to DP to debit his account and credit the broker’s account. Such instruction should reach the DP’s office at least 24 hours before the pay-in as otherwise DP will accept the instruction only at the investor’s risk. |
Q. Trading/Settlement : What is 'Standing Instruction' given in the account opening form? |
In a bank account, credit to the account is given only when a 'pay in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of investors, facility of 'standing instruction' is given. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip everytime you buy securities. If you are particular that securities can be credited to your account only with your consent, then do not say 'yes' [or tick ] to standing instruction in the application form. |
Q. Trading/Settlement : What is delivery instruction slip (DIS)? What precautions do one need to observe with respect to Delivery Instruction Slips? |
To give the delivery one has to fill a form called Delivery Instruction Slip (DIS). DIS may be compared to cheque book of a bank account. The following precautions are to be taken in respect of DIS:- • Ensure and insist with DP to issue DIS book. • Ensure that DIS numbers are pre-printed and DP takes acknowledgment for the DIS booklet issued to investor. • Ensure that your account number [client id] is pre-stamped. • If the account is a joint account, all the joint holders have to sign the instruction slips. Instruction cannot be executed if all joint holders have not signed. • Avoid using loose slips • Do not leave signed blank DIS with anyone viz., broker/sub-broker. • Keep the DIS book under lock and key when not in use. • If only one entry is made in the DIS book, strike out remaining space to prevent misuse by any one. • Investor should personally fill in target account -id and all details in the DIS. |
Q. Trading/Settlement : Is it possible to give delivery instructions to the DP over Internet and if yes, how? |
Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively. |
Q. Trading/Settlement : Why should BO mention “Reason” & “Consideration” while carrying out “Off- Market” Trade? |
It is a requirement from CDSL and Mandatory to mention in DIS. It is categorically mentioned by them that while one carry out “Off Market” transaction (I.e. a transaction not carried out through official market process.) the BO should mention reason why he has transferred this shares to other account. Reason can be in mode of Gift, Donation, transfer from one account to another account with a same client or transfer to family member a/c, closing of Account and Transferring to Other DP’s Account Etc. |
Q. Corporate Benefits : Is it possible to get securities allotted in public offering directly in the electronic form? |
Yes, it is possible to get securities allotted to in Public Offerings directly in the electronic form. In the public issue application form there is a provision to indicate the manner in which an investor wants the securities allotted. He has to mention the BO ID and the name and ID of the DP on the application form. Any allotment made will be credited into the BO account. |
Q. Corporate Benefits : How are cash corporate benefit such as dividend / interest received? |
The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from Depositories. The payment to the investors will be made by the company through the ECS (Electronic Clearing Service) facility, wherever available. Thus the dividend / interest will be credited to your bank account directly. Where ECS facility is not available dividend / interest will be given by issuing warrants on which your bank account details are printed. The bank account details will be those which you would have mentioned in your account opening form or changed thereafter. |
Q. Corporate Benefits : How would one receive non-cash corporate benefit such as bonus etc.? |
The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from depositories. The entitlement will be credited by the company directly into the BO account. |
Q. Corporate Benefits : Who should be contacted in case of discrepancies in corporate benefits? |
In case of discrepancies in corporate benefits, one can approach the company / its R&T( Registar & Transfer) Agent. |
Q. Pledging : Can one pledge dematerialized securities? |
Yes. In fact, pledging dematerialized securities is easier and more advantageous as compared to pledging physical securities. |
Q. Pledging : What should one do to pledge electronic securities? |
| The procedure to pledge electronic securities is as follows: • Both investor (pledgor) as well as the lender (pledgee) must have depository accounts with the same depository; • Investor has to initiate the pledge by submitting to DP the details of the securities to be pledged in a standard format ; • The pledgee has to confirm the request through his/her DP; • Once this is done, securities are pledged. • All financial transactions between the pledgor and the pledgee are handled as per usual practice outside the depository system. |
Q. Pledging : How can one close the pledge after repayment of loan? |
After one has repaid the loan, one can request for a closure of pledge by instructing the DP in a prescribed format. The pledgee on receiving the repayment will instruct his DP accordingly for the closure of the pledge. |
Q. Pledging : Can one change the securities offered in a pledge? |
Yes, if the pledgee [lender] agrees, one may change the securities offered in a pledge. |
Q. Pledging : Who would receive the corporate benefits on the pledged securities? |
The securities pledged are only blocked in the account of pledgor in favour of the pledgee. The pledgor would continue to receive all the corporate benefits. |
Q. Pledging : What is Lending and Borrowing of Securities? |
If any person required to deliver a security in the market does not readily have that security, he can borrow the same from another person who is willing to lend as per the Securities Lending and Borrowing Scheme. |
Q. Pledging : Can lending and borrowing be done directly between two persons? |
No. Lending and borrowing has to be done through an 'Approved Intermediary' registered with SEBI. The approved intermediary would borrow the securities for further lending to borrowers. Lenders of the securities and borrowers of the securities enter into separate agreements with the approved intermediary for lending and borrowing the securities. Lending and borrowing is effected through the depository system. |
Q. Pledging : Can I lend the securities lying in my account? |
Yes. You can lend your securities through Approved Intermediaries registered with SEBI. |
Q. Pledging : How would I lend my demat securities? |
You may enter into an agreement with the approved intermediary to be a lender under this scheme. After that, you may lend securities any time by submitting lending instruction to your DP |
Q. Pledging : How would I get back the securities lent by me? |
Intermediary may return the securities at any time or at the end of the agreed period of lending. Intermediary has to repay the securities together with any benefits received during the period of the loan. |
Q. Pledging : How would I receive the corporate benefits which would accrue on these securities during the period of lending? |
The benefits will be given to the Intermediary/borrower. However, whenever the securities are being returned / recalled. Intermediary/borrower will return the securities together with benefits received. |
Q. Nomination : Who can nominate? |
Nomination can be made only by individuals holding beneficiary accounts either singly or jointly. Non-individuals including society, trust, body corporate, Karta of Hindu Undivided Family, holder of power of attorney cannot nominate. |
Q. Nomination : Who can be a nominee? |
Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder. |
Q. Nomination : Why I/We should nominate? |
It is in the interest of the BO to make nomination. This will help his/her from legal heirs to approach court of law, Obtaining of Succession certificate, Save Expenses In absence or deceased of a BO( Beneficiary Owner). |
Q. Transmission of demat securities : What is transmission of demat securities? |
Transmission is the process by which securities of a deceased account holder are of dematerialized holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP, whereas in case of physical securities the legal heirs/nominee/surviving joint holder has to independently correspond with each company in which securities are held. |
Q. Transmission of demat securities : In the event of death of the sole holder, how the successors should claim the securities lying in the demat account? |
The claimant should submit to the concerned DP an application Transmission Request Form (TRF) along with the following supporting documents 1. In case of death of sole holder where the sole holder has appointed a nominee Notarized copy of the death certificate 2. In case of death of the sole holder, where the sole holder has not appointed a nominee Notarized copy of the death certificate Any one of the below mentioned documents - Succession certificate Copy of probated will Letter of Administration The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant. The major advantage in case of dematerialized holdings is that the transmission formalities for all securities held with a DP can be completed by interaction with the DP alone, unlike in the case of physical share certificates, where the claimant will have to interact with each Issuing company or its Registrar separately. |
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