What is a depository?

A depository is an organisation, 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.

How many Depositories are registered with SEBI?

At present two Depositories viz. National Securities Depository Ltd (NSDL) and Central Depository Services (I) Ltd (CDSL) are registered with SEBI.

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.

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 per cent 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) account to trade at the exchanges.

How can services of a depository be availed of?

To avail of the services of a depository, the investor is required to open an account with a depository participant of any depository.

How can one open an account?

First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI.

All applicants should carry original documents for verification by an authorised official of the depository participant, under his signature.

Further, the investor has to sign an agreement with DP in a depository prescribed standard format, which details rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference.

The DP will open the account in the system and give an account number, which is also called BO ID (Beneficiary owner Identification number).

The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisation by removing account opening charges, transaction charges for credit of securities, and custody charges.

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 encashed by anyone 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.

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.

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.

Can multiple accounts be opened?

Yes. An investor can open more than one account in the same name with the same DP and also with different DPs.

Does the investor have to keep any minimum balance of securities in his/her accounts?

No.

Is it necessary to have account with the same DP as broker has?

No. Depository / DP can be chosen by investor as per convenience irrespective of the DP of the broker.

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.

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 dematerialisation 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 dematerialise the securities.

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.

Source: www.sebi.gov.in

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