Depository Participant SEBI Registration

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What is Depository Participant?

A depository is a form of institution or organization which holds securities of investors in the form of shares, debentures, bonds, government securities, mutual fund units etc. in electronic form at their request through a registered depository participant. It also provides services in relation to transactions in securities.

The similarity between bank and depository as explained below

BANK DEPOSITORY
It holds funds in an account It holds securities in an account
On the instruction of account holder, it transfers the funds between their accounts On the instruction of account holder, it transfers securities between their accounts.
It facilitates transfer without having to handle money It facilitates transfer of ownership without having to handle securities.

MAIN FUNCTION OF DEPOSITORY

It works as a link between the listed companies which issue shares and their shareholders. Listed Companies issues their shares through agents associated with it called depository participants or DPs. A DP can be a bank, financial institution, a broker, or any entity eligible as per SEBI norms and who is responsible for the final transfer of shares from the depository to investors. The investor, at the end of a transaction, receives a confirmation from the depository.

SERVICES PROVIDED BY DEPOSITORY

  • Dematerialization (usually known as demat) process of converting physical certificates of investor into an equivalent number of Securities electronic form
  • Rematerialization, known as Remat, is a process of converting securities held in electronic form in a demat account back in physical certificates form.
  • Transfer of securities, change of beneficial ownership
  • Settlement of trades done on exchange connected to the Depository
  • Pledging and Unpledging of Securities for loan against shares
  • Corporate action benefits directly transfer to the Demat and Bank account of customer

NEED FOR THE DEPOSITORY

A depository eliminates the risk of holding physical securities. After the depository system came, such risks as of damage, loss or theft have been greatly reduced since the shares are held in and transferred in an electronic manner. They also reduce the paperwork involved in trading and fasten the transfer of shares.

TYPES OF DEPOSITORY

  • As per the Depository Act of 1996 two depositories are established in India, namely National Securities Depository Limited (NSDL) which is promoted by the National Stock Exchange, Industrial Development Bank of India and Unit Trust of India among others. The other depository is the Central Depository Services Limited (CDSL) which is promoted by the Bombay Stock Exchange Bombay Stock Exchange, State Bank of India, Bank of India among others. 

DEPOSITORY PARTICIPANT

A DP is an agent 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 them as per the https://en.wikipedia.org/wiki/Depositories_Act. The DP may be a financial institution, scheduled commercial banks, foreign banks operating in India with the approval of RBI, clearing corporations/clearing houses, stock-brokers etc.

Depositories and Depository participant both are regulated under the purview of SEBI on the basis guidelines framed by them. DP can be operational only after the registration with SEBI post getting recommended by the NSDL and CDSL.

Procedure for the grant of certificate of registration as Depository Participant is explained below:

  • The applicant seeking to get registered shall file an application to the board for the grant of registration in Form E, through depository in which the applicant proposes to act as a participant, along with the fees of INR 15,000.
  • Depository then, forward this application to the board not later than 30 days of its receipt along with the recommendation that applicant complies with the eligibility criteria as specified in regulations.
  • On receipt of application, the board may ask the applicant or depository to which applicant is getting to be admitted as participant, to furnish further information or present in person, if required for the grant of certificate. The board can even reject the application if believes that it is not complete in all respect and also doesn’t conform to the specified instruction.
  • For the purpose of grant of certificate of registration, the board considers all the matters which is relevant to carry out the activities of a Depository Participant as discussed below:
  • the applicant should belong to one of the following categories:

1. a public financial institution as defined
2. With the approval of RBI, only a foreign bank operating in India
3. a clearing corporation of a stock exchange
4. State Financial Corporation
5. A stockbroker who has been granted a certificate of registration by the board
6. Such others as prescribed in the regulation

  • The applicant should be fit and proper person
  • The applicant should be eligible to get admitted as participant to depository through which it has filled the application to the board.
  • If the board is satisfied that applicant is eligible for the grant of certificate, they grant the certificate of registration in Form F subject to the payment of fees as prescribed in the regulations.

As depository system enhances the liquidity of securities in the market, they have reduced the scope of theft, fraud, and damages; therefore, investor is more interested in investing through this mode. So, applicant who is seeking or interested in starting their business as DP, Enterslice can help them in getting registered with SEBI and preparing all other documents as required The interested one can mail their query on our mail-id info@enterslice.com.. Detailed information is also provided on our website www.enterslice.com.

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