Beruflich Dokumente
Kultur Dokumente
OF
IN
DEMATERIALIZATION.
Prepared By:
Name of Group Members Ruchit Turakhia Ankita Mamaniya Krusha Tankaria Pratik Rambhia Kinjal Kuvadia Punit Bafna Roll No 47 21 45 56 20 59
INTRODUCTION TO DEPOSITORY
The Depositories Act
The Depositories Act, 1996, ushered in an era of efficient capital market infrastructure, improved investor protection, reduced risks and increased transparency of transactions in the securities market. It also immensely benefited the issuer companies, in terms of reduced costs and the effort expended in managing their shareholder populace. Perhaps, no other single act other than the Depositories Act has had such profound all round impact on every single stakeholder in the Indian capital markets. This legislation envisaged multiple depositories in India to ensure benefits of competition for the users of the depository system. The Depositories Act which facilitated establishment of depositories (like CDSL) in India sought to effectively curb irregularities in the capital market, and protect the interests of the investors, and paved a way for an orderly conduct of the financial markets through free transferability of securities with speed, accuracy, transparency etc. Due to the introduction of the depository system, the investors are able to enjoy many benefits like free and instant transferability in a secured manner at lower costs, free from the problems like bad deliveries, odd-lots etc. Today the tradable lot is reduced to one unit hence even a common man is able to invest money in one equity share or bond or debenture. The investor is able to save a lot on account of stamp duty as government has exempted stamp duty on transfer of securities at present. Investors are also spared from the problems of preserving the securities held in physical form.
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What is a Depository?
The Depositories Act defines a depository as a company formed and registered under the Companies Act, 1956 and which has been granted a certificate of registration under subsection (1A) of section 12 of Securities and Exchange Board of India Act, 1992. The main function of a depository is to dematerialize securities and enable their transactions in book entry form. As per The Bank for International Settlements (BIS), depository is a facility for holding securities which enables securities transactions to be processed by book entry. Physical securities may be immobilized by the depository or securities may be dematerialized (so that they exist only as electronic records). In simple terms depository is an organization where securities of an investor are held in electronic form.
(REF: BSEBCCD study material v3)
(REF: http://investor.sebi.gov.in/faq/dematfaq.html)
NSDL and CDSL essentially perform the following functions through their various participants
1. Enable surrender and withdrawal of securities to and from the depository. 2. Maintain investor holdings in the electronic form. 3. Effect settlement of securities traded on the Exchanges. 4. Carry out settlement of trades not done on the Stock Exchanges i.e. Off Market Trades. 5. Coordination of benefits accruing on the depository accounts of investors.
(REF: https://www.ilfsdp.com/faq_general.htm)
Dematerialization
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Meaning of Dematerialization
Dematerialization is a process by which physical certificates of an investor are converted into electronic form and credited to the account of the depository participant. Dematted securities do not have any certificate numbers or distinctive numbers and are dealt only in quantity, i.e., the securities are replaceable.
Investors can dematerialize only those certificates that are already registered in their names and are in the list of securities admitted for dematerialization. These are: shares, scrips, stocks, bonds, debentures, stock or other marketable securities of a like nature in or of any incorporated company or other body corporate, units of mutual funds, rights under collective investment schemes and venture capital funds, commercial paper, certificate of deposit, securities debt, money market instruments and unlisted securities, underlying sharing of American Depository Receipts and Global Depository Receipts issued to non-resident holders. Dematerialization is the process of converting physical holdings into electronic form with the depository wherein the share certificates are shredded and corresponding entry of the number of shares is done in the opened with the depository.
The securities held in dematerialized form are fungible; that is, they do not bear any notable feature like distinctive number, folio number or certificate number. Once shares get dematerialized, they lose their identity in terms of share certificate distinctive numbers and folio numbers.
3. Securities must be in the name of the account holders and owned by him. 4. Separate demat requisition form is required for each issuer company. 5. Dematerialization Request Form (DRF) should be signed by all the holders so as to match specimen signature.
Process of Dematerialization
A holder of eligible securities in the depository system may get his physical holdings converted into electronic form by making a request through the DP with whom he has his beneficiary account.
Investo r
DP
2 A
2 3
R&T Agent
NSDL/ CDSL
2A. DP dispatches the physical certificates along with the DRF to the R&T Agent. 3. NSDL/CDSL records the details of the electronic request in the system and forwards the request to the R&T Agent. 4. R&T Agent, on receiving the physical documents and the electronic request, verifies and checks them. Once the R&T Agent is satisfied, dematerialization of the concerned securities is electronically confirmed to NSDL/CDSL.
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5.
NSDL/CDSL credits the dematerialized securities to the beneficiary account of the investor and intimates the DP electronically. The DP issues a statement of transaction to the client. (REF: NSEF 017-07 NSDL handbook-III)