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A Depository system is very similar to the Banking System by replacing the cash by securities. A Depository System is a corporation where the shareholder’s securities are held in electronic form at the request of the shareholder through the medium of Depository Participant. The entity is appointed by a depository through which its services are provided to the investors.
For availing the services such as Dematerialization and Rematerialization of shares, the investor opens a Demat account with a Depository Participants, it also requires-
2. The Depository must be registered with SEBI. The Depository Participant has to comply with the eligibility criteria prescribed in the SEBI (Depository and Participants) Regulations, 2018.SEBI grants the certificate of registration.
Note-There are two depositories functioning in India, i.e. NSDL (National Securities Depository Limited)AND CDSIL(Central Depository Services(India) Limited.
Depository Participant acts as an agent of the investor at the Stock Exchange. It is the representative of the Depository in the Depository system by presuming the link between the Company and the investor through the Depository.
Further, as per the SEBI GUIDELINES, below-mentioned participants can also become the Depository Participants-
The various services provided by the Depository Participants to the Stock Investor are-
Dematerialization of securities is a process by which the physical securities are converted into electronic securities at the request of the investor. However, the process is optional, and the investor can still hold shares in physical form.
The Process involved in the Dematerialization-Various steps are involved in the Dematerialization Process-
What is Rematerialization Process?
Rematerialization of securities is a process by which the electronic securities are converted into physical securities at the request of the investor.
The Process Involved in the Rematerialization-Various steps are involved in the Rematerialization Process-
Immobilization is a process where the physical share certificate is kept with the depository for safe custody, and all the subsequent transactions in these securities take place in the Book-entry form. The immobilization of fresh issues may be achieved by issuing a jumbo certificate representing the entire issue in the name of the depository, and the owner has the right to withdraw his physical securities as and when required.
Trade settlement by delivery or receipt of securities-
The depository participants help the Stock investor in the settlement when the trade is final, and the investor must make the payment to the seller while the seller delivers the securities to the buyer investor. As the settlement date denotes the legal transfer of ownership of securities.
Conclusion-The functions and responsibilities of the Depository Participants are laid out by the SEBI in the Regulations.