NSDL PArt-3

8/6/2019 NSDL PArt-3

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NSDLDepository Operations Module

Set-3


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Account Opening

An investor may open an account with

several DPs or he may open severalaccounts with a single DP


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Types of Accounts

Beneficiary Account :ABeneficiary Account is an ownershipaccount. The holder/s of securities in this type of account own

those securities. all legal entities with the exception ofpartnership firms can open an account in the depositorysystem.

Clearing MemberAccount :The Clearing MemberAccount andIntermediary Account are transitory accounts. The securities inthese accounts are held for a commercial purpose only

Intermediary Account :An Intermediary Account can opened bya SEBI registered intermediary for the purpose of stock lendingand borrowing.


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DP- Client Agreement

Both parties have the right to terminate

agreement DP to resolve grievance within 30 days

In case the client defaults in payment of

charges, DP may charge a maximum interest

of 24% p.a.


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Agreement has to be made on non-judicial stamp paper should be signedby:

the depository participant, itself or through an

authorised signatory; and the sole holder in case of single holding; or

all the joint holders in case of joint holding, or

the constituted attorney in the case ofNRI/corporate/trust accounts


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GENERAL

All communication shall be sent at the adress of the Sole/First holder only.

Thumb impressions and signatures other than English or Hindi or any of the other language

not contained in the 8th Schedule of the Constitution of India must be attested by aMagistrate or a Notary Public or a Special Executive Magistrate.

Participants must verify the copy of the document with the original.

Non- individuals including society, trust, body corporate, partnership firm, karta of HinduUndivided Family, holder of power of attorney cannot nominate

Investors are advised to open their account in their fully expanded name

the name of demat account holder(s) should be compared with the name appearing on thewebsite of the Income Tax Department (ITD) i.e. ''http://incometaxi ndiaefiling .gov.in/challan/enterpanforchallan. isp On th is website

9-Digit Code Number of the Bank and branch appearing on the MICR cheque issued by theBank


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The FII-DP agreement

it authorises the DP fo act on behalf of the FII

for availing depository services and it shouldhave been filed with SEBI.


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ForNRls, Fils, OCBs, etc. accounts

proof is required for both addresses - that of

the account holder as well as the constitutedattorney.

the DP must obtain original or attested

copies of the power of attorney and the

approval letter from RBI permitting them toinvest If the account holder is an FII or an

OCB,


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POA

such depository accounts can be operated

both by the client(s) as well as by the POAholder.

Therefore, DPs should ensure that the

signatures of the account holder(s) and the

POA is there


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TAX IMPLICATION FORDEMATERIALISED SHARES

in the case of securities held in dematerialised form, for determining 'date oftransfer' and 'period of holding', the FIFO (first in first out) method would beapplicable.

example:

Date of Credit Particulars Quantity

01/01/2000 Purchased directly in dematerialised form on 24/12/1999 2000

05/01/2000 Dematerialised shares originally purchased in March 1985 5000

10/01/2000 Purchased directly in dematerialised form on 06/01/2000 4000

15/01/2000 Dematerialised shares originally purchased in May 1974 3000

If say, 2500 shares were sold from out of this account, then the period of holdingand the cost of acquisition of the first 2000 shares should be as from24/12/1999 and the cost thereof, whereas the balance will be treated as havingbeen acquired in March 1985, at the relevant cost. This is the effect of FIFOmethod.


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Transmission & Nomination

transfer of shares relates to a voluntary act ofthe shareholder;

transmission is brought about by operation of

law; the word "transmission" means

devolution of title to shares, for example,

devolution by death, succession, inheritance,

bankruptcy, marriage, etc.


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Transmission - Single Holder

In the event of death of the sole holder, if valid nomination hasnot been made, the claimants/ successors/legal heirs of the

deceased can get the securities transmitted in their favour bysubmitting their claim duly supported by the relevant legaldocuments to the DP.

A single request is sufficient for all securities held in theaccount of the deceased.

If the claimants/ legal heirs/successors have an existing

beneficiary account in their name, the securities to betransmitted would be credited to their existing account.

In other cases, claimants/legal heirs/ successors will have toopen an account with a DP to get the securities transmitted.


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Transmission - Joint Accounts

If anyone of the joint holders of a security

dies, the surviving joint holders can get thesecurities transmitted in their favour by

producing the death certificate of the

deceased

The surviving joint holder(s) will have to opena new account with the DP in their name(s).


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TRANSMISSION > 1LAC

A copy of the death certificate, duly notarised;

A copy of the succession certificate, duly notarised,

or an order of a competent court,

if the deceased has not left a Will,A copy of theProbate or Letter ofAdministration duly notarised.


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TRANSMISSION < 1LAC

Copy of death certificate duly notarised;

Letter of Indemnity duly supported by a guarantee ofan independent surety acceptable to the DP, made

on appropriate non-judicial stamp paper;

An affidavit made on appropriate non-judicial stamp

paper; and

No objection certificate(s) from all the legal heir(s).


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Transmission- HUF

HUF may appoint the eldest surviving male member of the HUF surviving members, as thenew Karta of the HUF.

True Copy of the death certificate of the Karta, duly certified by a notary public;

if >10 lacs An appropriate order by a competent court ,

If < 10 lacs ,the Participant shall process the transmission request on the basis of thefollowing documents:

a) Request for transmission in Annexure "0", duly signed by the New Karta;

b) A declaration of the list of surviving members of HUF in an affidavit in the prescribed form

(Annexure "0"), duly notarised;

c) Letter of Indemnity in the prescribed form (Annexure "0") from the surviving members.

d) Where there is an objection from any member of the HUF, transmission of securities held in thebeneficial owner account should be effected only on the basis of a Decree by a competent Court orthe Deed of Partition


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Dematerialisation

International Securities Identification Number (ISIN) is a uniqueidentification number for each security issued in any of the

International Standards Organisation (ISO) member countriesin accordance with the ISIN Standard (ISO 6166).

ISIN is a 12-character long identification mark.

It has three components - a pre-fix, a basic number and acheck digit.

The pre-fix is a two-letter country code as stated under ISO3166 (IN for India).

The basic number comprises of nine alphanumeric characters(letter and/or digits).


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Dematerialization - Checklist for

Investors

The DRF has to be obtained only from the DP with whom they have opened an account.

The DRF has to be filled in duplicate/triplicate as required by the DP.

Separate forms should be filled for separate ISIN numbers of the company.

Separate forms should be filled for lock-in and free securities.

All the holders should sign the DRF form. Signatures should match with those of the specimens on theaccount opening form. However, if the signature with the company/R& T Agent is different from thesignature with the DP, the client may affix both signatures.

The order of the holders should be same as that in the account opening form.

While submitting the shares they should be defaced by mentioning on it "surrendered for dematerialisation".

After submitting the certificates, an acknowledgement slip duly signed by the DP should be collected.

Demat request form for dematerialising government securities is different and is called" DRF GS".


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Dematerialisation- Checklist forDP

Client has submitted the securities for dematerialisation along with the

Dematerialisation Request Form (DR F).

No dematerialisation request, other than one from a registered holder of securities, has been entertained.

The certificates submitted by the client for demateriaiisation belong to the eligible list of securities admitted by the Depository.

Verify that the DRF submitted by the client has been filled completely and duly signed.

The DP has to issue to the client an acknowledgement slip duly signed and stamped.

Verify the signature of the client on the form and compare it with the specimen available

in its records. If the signatures are different, the DP has to ensure proper identification of the client.

NSDL issues circulars on caution to be exercised in respect of shares belonging to some companies. Such circulars should bereferred to before accepting a demat request.

If the form is in order, the request details are entered in its DPM and the DPM generates a Dematerialisation Request Number(DRN).

The DRN so generated is entered in the space provided for the purpose in the DRF. The details given in the DRF should matchwith the details of reports generated by DPM and verified by a person other than the person who had entered the data.


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Contd

The DRF is forwarded to the Issuer or its R& T Agent only after ascertaining that thenumber of certificates annexed with the DRF tallies with the number of certificatesmentioned on the DRF, within 7 days of its receipt.

The details of the certificates submitted for dematerialisation with the details filled up are inconsonance with the DRF.

The client has marked the certificates submitted for demateriaiisation with the words"Surrendered for Dematerialisation".

DP must ensure that the security certificates submitted for dematerialisation to the Issuer orits Registrar and TransferAgent bear the DP name, DP Id and Client Id. The safety and

security of the certificates submitted for dematerialisation till the certificates were forwardedto the Issuer or its R & T has to be ensured.

Punch two holes on the company name on the security certificates before forwarding themto the Issuer or its R& T Agent.


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Contd

Ensure that the client has filled in a separate DRF for securitieshaving distinct ISINs.

Ensure that the client has filled in a separate DRF for locked inand free securities having the same ISIN.

Ensure that the client has submitted a separate DRF for each ofhis/their accounts maintained with the DP.

DRF and certificates have to be sent to the correct address ofthe company where they are accepted. NSDL issues circularsgiving information about the addresses where physicaldocuments will be accepted.


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Transposition cum Demat

In case of transposition-cum-dematerialisation, the

Client can get securities dematerialised in the same

account if the names appearing on the certificates

match with the names in which the account has been

opened but are in a different order.

Separate Transposition form should be filled by the

joint holders for securities having distinct ISINs


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Trading and Settlement

Transfer due to a transaction done on a

person to person basis is called 'off-market'transaction.

Transfer arising out of a transaction done on

a stock exchange.

Transfer arising out of transmission andaccount closure.


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Settlement of Off-Market Transactions

Any trade that is cleared and settled without

the participation of a clearing corporation iscalled offf market trade


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Market Settlement-Demat Shares

A market trade is one that is settled through participation of a

Clearing Corporation The broker has to complete the pay-in before the deadline

prescribed by the stock exchange.

The broker removes securities from his account to CC/CH ofthe stock exchange concerned, before the deadline given bythe stock exchange.

The CC/CH gives pay-out and securities are transferred to thebuying broker's account.

The broker then gives delivery instructions to his DP to transfersecurities to the buyer's account.


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SETTLEMENT MOVEMENT

Seller gives delivery instructions to his DP to move securitiesfrom his account to his broker's account.

Securities are transferred from broker's account to CC on thebasis of a delivery out instruction.

On pay-out, securities are moved from CC to buying broker's

account.

Buying broker gives instructions and securities move to thebuyer's account.


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Descriptions of a transaction

Market Type

Settlement Number Every settlement number has a trade beginning day, trade-

ending day, settlement pay-in day and settlement pay-out

day.

stock exchanges divide a period of one year [generally

calendar year] into several settlement periods and allocatesettlement number for each settlement-period.

All these days collectively are called 'settlement calendar'.


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Steps in Pay-in and Pay-out:

To be submitted in duplicate for acknowledgement

Irreversible delivery-out instructions are instructions

which cannot be cancelled once effected.

Use separate forms for reversible delivery-outinstructions and irreversible delivery-out instructions.

In case it is not explicitly mentioned that it is anirreversible delivery-out instruction, it will beassumed to be a reversible delivery-out instruction


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Direct Delivery byClearing

Corporation to Client Account

Direct delivery of securities to the clients can

also be effected by the Clearing Corporation,subject to completion of necessary

procedures.


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Inter-Settlement Transfers

The clearing member may have to move

securities from one bucket with a differentmarket type-settlement number combinationto another bucket from where pay-yin is to beeffected.

To effect this movement a clearing membercan give an instruction to move securitiesfrom one settlement to another settlementwhich is called 'inter-settlement'.


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Inter-depository transfer

Transfer of securities from an account in onedepository to an account in another depository is

termed as an inter-depository transfer. This facility is quite similar to account transfers within

NSDL.

Inter Depository Transfer instructions for the day are

exchanged online between the two depositories. The deadline time for DPs to verify & release Inter

Depository Transfer delivery/ receipt instructions is 6p.m. on weekdays and 2.30 p.m. on Saturdays


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Check List for Settlement

Verify signature.

Ensure strict adherence to submission of instructions within pre-defined settlement

deadlines.

Advise and ensure that all clients (if joint holders) sign instruction. Only in case of CM allthe facility of either one or all joint holders is permitted.

Verify all fields in instruction form.

Accept delivery instructions on T +1 (in physical form upto 4 p.m. and 6 p.m. in case ofelectronic instructions) for pay-in of securities.

Check RBI approval in case of NRI transactions.

In case of natural guardian, no court approval is needed for movement of securities fromthe account held in name of the minor.


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Pledge and Hypothecation

For this purpose, both the parties to the

agreement, i.e., the pledgor and the pledgeemust have a beneficiary account with NSDL

However, both parties need not have their

depository account with the same DP.


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Procedure forPledge/Hypothecation

The pledgor initiates the creation of

pledge/hypothecation through its DP and thepledgee instructs its DP to confirm thecreation of the pledge.

After the pledgor has repaid the loan to thepledgee, the pledgor initiates the closure ofpledge/hypothecation through its DP and thepledgee instructs'its DP to confirm theclosure of the pledge/hypothecation.


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Creation ofPledge/Hypothecation by

Pledgor

The borrower is called a pledgor and the

lender is called a pledgee. Multiple pledge instructions can be executed

on the basis of a single agreement


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Substitution of Securities Offered in

Pledge

A pledgor (borrower) can substitute the

securities offered in a pledge transaction, ifthe pledgee (lender) agrees to it


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Corporate Benefits for

Pledged/Hypothecated Securities

Ownership of the pledged/hypothecated

securities remains with the pledgor(borrower) until the pledge is invoked

Dividends will be given to the borrower in the

usual manner and bonus shares will be

credited to his account as pledged balances.


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Stock Lending and Borrowing

The transactions involving lending andborrowing of securities are executed throughapproved intermediaries duly registered withSEBI under the Securities Lending Scheme,1997

Such an intermediary may deal in thedepository system only through a specialaccount known as Intermediary Account,opened with a DP


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Intermediary

All entities who can provide the services of

stock lending have to be approved by SEBI The applicant has to have a net worth of Rs.

50 crore

If the applicant is a clearing house or a

clearing corporation and has the specifiednet worth and has obtained the concurrent

approval of the stock exchange


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Under the scheme

a borrower is a person who borrows thesecurities through an approved Intermediary

The lender is one who deposits with anIntermediary the securities registered in hisname or in the name of any other person onwhose behalf he is authorised to act, for thepurpose of lending under the Scheme.

Securities are moved from lender's accountto intermediary's account


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Repayment of securities ByBorrower

to Intermediary

In case the borrower repays the securities to

the intermediary outside the securitieslending module of DPM system, the DP of

the borrower as well as the intermediary

have to inform NSDL accordingly.


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Public Issues

According to the Companies Act, 1956

(section 68B

) every listed public company,making an initial offer of any security of Rs.

10 crore and above has to issue it only in

dematerialised form in accordance with

Depositories Act, 1996.

Documents

NSDL PArt-3