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Published by routraykhushboo

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Categories:Types, Business/Law
Published by: routraykhushboo on Jan 03, 2012
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 FAQs on DEPOSITORY PARTICIPANTS1. What is a depository?
A “Depository” is a provider of facility for holding securities in book entry orelectronic form. It is a kind of bank for securities like shares, debentures,bonds, etc. It also facilitates transactions in the securities held by it.
2. What is dematerialization (Demat)?
“Dematerialization” is a process by which physical certificates areconverted into electronic form.
3. What is Rematerialization (Remat)?
Rematerialization is the process of converting securities held in electronicform in a demat account back in physical certificate form.
Who is registered owner of Securities?
When securities of a company are held in physical form by an investor,his/ her name is recorded in the books of the company as a ‘RegisteredOwner’ of the securities. When physical shares are converted intoelectronic form, the depository becomes ‘Registered owner” in the booksof the company and investor’s name is removed from books of thecompany.
5. Who is a Beneficial Owner (BO)?
All the benefits of the dematerialized shares are given to the actualinvestor since the Depository holds the securities in a fiduciary capacity onbehalf of the investors who have opened a demat account with thedepository. Hence, the actual investor is the “Beneficial Owner” (BO) ofthe securities.
6. Who is a Depository Participant?
A “Depository Participant” (DP) is an agent of the depository who isauthorized to offer depository services to investors.
7. Who can be a Depository Participant?
Financial institutions, banks, custodians and stockbrokers complying withthe requirements prescribed by SEBI/ Depositories can be registered asDP.
8. Who is an Issuer?
“Issuer” means any entity such as a corporate / state or centralgovernment organizations issuing securities which can be held indepository in electronic form.
9. Who is an RTA?
An RTA (Registrar and Transfer Agent) is an agent of the issuer. RTA actas an intermediary between the issuer and depository for providingservices such as Dematerialization, Rematerialization, Initial Public Offersand Corporate actions.
10. What is an ISIN (International Securities Identification Number)?
“ISIN” is a unique 12 digit alphanumeric code given to a security, shares,debentures, bonds etc. when the security is admitted in the depositorysystem. First two digits of the ISIN code indicate country of registration.For all securities registered in depository in India, first two digits of theISIN code are ‘IN’.
11. Whether different securities issued by the same Issuer will havesame ISIN?
No, different securities issued by the same issuer will have different ISINcode.
12. What are the services provided by a Depository?
Following services are provided by a depository to the beneficial ownersbut of course, through a depository participant:a. Opening a demat account.b. Dematerialization, i.e. converting physical securities into electronicform.c. Rematerialization, i.e. converting electronic securities balances held in aBO account into physical form.d. Maintaining record of securities held by the beneficial owners in theelectronic form.e. Settlement of trades by delivery or receipt of securities from / in BOaccounts.f. Settlement of off-market transactions between BOsg. Receiving electronic credit in respect of securities allotted by issuersunder IPO or otherwise on behalf of demat account holders.
g. Receiving non cash corporate benefits, such as, allotment of bonus andrights shares or any other non cash corporate benefits given by theissuers in electronic form on behalf of its demat account holders.h. Pledging of dematerialized securities & facilitating loans against shares.i. Freezing of the demat account for debits, credits, or both.
13. What is the legal framework governing the depository functions inIndia?
A depository functions under the following rules and regulations:1. The Depositories Act, 1996,2. SEBI (Depositories and Participant) Regulations.3. Depository Bye-laws which are framed under the above two documents.4. Prevention of Money Laundering Act (PMLA), 2002
14. Can a demat account be opened directly with Depository?
No. A demat account can not be opened directly with Depository. It has tobe opened only though a DP of Depository.
15. Can an investor open multiple demat accounts?
Yes, an investor can open multiple demat accounts. There is no restrictionon number of demat accounts which an investor can open.
16. Is it necessary for an investor to open an account with the same DPas that of his broker for settling the trades done through him?
There is absolutely no compulsions on any investor to open his demataccount with the same DP as that of his broker. Investor can open accountwith the DP of his/her choice and can carry on his trading activity througha broker of his choice.
17. Can a demat account be opened in the name of Joint Holders?
Yes. A demat account can be a opened in a single name or in jointholders’ name. There can be maximum three account holders i.e. onemain holder and two joint holders.
18. Can a Demat account be opened for a minor?
Demat account can be opened in the name of a minor. The account will beoperated by a guardian till the minor becomes major. Guardian has to bethe father or in his absence mother. In absence of both, father or mother,the guardian can be appointed by court.

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