Depository Rules 1996

Options to obtain a certificate of securities or to hold securities with a custodian: the investor chooses a DP of his choice and opens an account with him. The process will be like opening an account with a bank. The investor receives an identification number called Client ID. It`s like the bank account number. This no is the reference point for all transactions with DP. Each investor must coordinate with a custodian using a DP in order to dematerialize his participation. This step is necessary whether an investor already owns securities or securities have not yet been issued as part of a new issue. To explain in simple terms, a deposit is a place where something is deposited for security purposes. It can be a bank, a company or an institution that holds securities and facilitates the exchange of securities.

The depositary is an institution that is authorized to accept cash deposits from its customers. The Depositaries Act 1996 was enacted with the aim of ensuring the free portability of securities with speed, accuracy and certainty by making the securities of public companies freely transferable, subject to certain exceptions, limiting the right of the company to exercise its discretion in the execution of transfer securities and to apply to the act of transfer and other procedural requirements under the Companies Act. to give up. Upon receipt of the securities certificate referred to in subsection (1), the issuer shall delete the securities certificate and replace the name of the depositary as the registered owner in respect of the security in its records and inform the depositary thereof. Provision of information and records by the depositary and the issuer. may, in the interest of investors, request, in written order, any issuer, depositary, participant or beneficial owner to provide in writing the necessary information on securities held with a depositary; or authorize a person to conduct an investigation or inspection concerning the affairs of the issuer, beneficial owner, depositary or participant who submits a report on that investigation or inspection within the time limit set out in the order. Pursuant to section 18 of the Act, if the board of directors is satisfied that it is necessary in the public interest or in the interest of investors, it may, in writing, (a) require any issuer, custodian, participant or beneficial owner to provide in writing the necessary information about the securities held with a depositary; or (b) authorize any person to conduct an investigation or inspection concerning the affairs of the issuer, beneficial owner, depositary or participant who submits a report on that investigation or inspection to the issuer, custodian or participant within the time limit set out in the order. In addition, in the interest of investors and in order to prevent the depositary`s business from being conducted in a manner detrimental to investors or the securities market, the Board of Directors may issue such instructions: (a) to any depositary, participant or person associated with the securities market; or (b) to an issuer that is appropriate for the benefit of investors or the securities market. Pursuant to section 12(1A) of the Securities and Exchange Board of India Act, 1992; “Depositary” means a company incorporated and registered under the Companies Act 1956 and which has received a certificate of registration pursuant to section 12(1A) of the Securities and Exchange Board of India Act, 1992. Investors who choose to join the scheme must be registered with one or more participants who are the custodian`s agents.

Investors have the choice of retaining existing securities certificates or opting for the custody method. In accordance with section 3 (1) of the Act, the depositary is required to obtain a certificate of commencement of business from the Securities and Exchange Board of India. Pursuant to subsection 3, the Board shall not issue a certificate under subsection (1) unless it is satisfied that the depositary has adequate systems and safeguards in place to prevent the manipulation of records and transactions. No depositary may act as a depositary unless it receives from SEBI a certificate of commencement of business. Any person who subscribes to securities offered by an issuer has the possibility either to obtain securities certificates or to hold securities from a depositary. Any loss suffered by the beneficial owner as a result of the negligence of the depositary or participant shall be compensated by the depositary to that beneficial owner. The Participant shall designate a person through whom the beneficial owner of the securities would use the depositary and who is the custodian bank such as banks, financial institutions and large corporate brokerage firms. The word “custodian” is defined as “the part of the institution (e.g., bank or trust) that receives a deposit. The one where everything is deposited in trust is where it is deposited as a “custodian”. The depositary has an obligation to keep the object with reasonable care and to return it to the depositor upon request. A custodian holds securities (such as shares, debentures, bonds, government bonds, shares, etc.) of investors in electronic form. In addition to holding securities, a custodian also provides services related to securities transactions.

He acts as trustee of the owner, because the securities are entrusted to him in trust. He is also the representative of the owner of the securities. The Depositary Act provides for the establishment of depositaries such as National Securities Depository Limited (NSDL) and Central Depository Services Limited, which provide depositary services in electronic form for securities traded on the stock and bond markets.