Project on Investment in Securities Market
Financial Planing
(Source: SEBI Website - Securities Market Awareness Campaign
Empowering Investors Through Education)

How to transact in securities?
Depository services

There are two depositories, namely the National Securities Depository Limited and Central Depository Services (India) Limited which maintain ownership records of securities in book entry form and effect transfer of securities with speed, accuracy and security. The depositories hold securities in demat and all securities in depository are fungible. While the investors in securities appear as beneficial owners in the records of the depository, the depositories appear as registered owners in the record of the company. All rights relating to securities, however, accrue to beneficial owners.

Holding securities in the demat form helps you get get immediate transfer of securities in case of purchases; you do not pay stamp duty on transfer of securities; you avoid risks associated with physical certificates such as bad delivery, fake securities, etc.

A depository interfaces with the investors through its agents called Depository Participants (DPs). If you want to avail of the services offered by a depository, you need to open an account with a DP. This is similar to opening an account with any branch of a bank in order to utilise the bank's services.

You can dematerialise the securities which are registered in your name and are in the list of securities admitted for dematerialisation with either depository. You can get an updated list of securities admitted for dematerialisation from your DP or web sites of depositories. If you wish to get back your securities in physical form, you have to request your DP for rematerialisation of the same. The DP will forward your request to the depository which will take the matter with the concerned company. The company will issue physical certificates to you. You have full freedom to hold your securities in physical or demat form, as you wish.

You should select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors you should take into account are: convenience (proximity to your office/residence, business hours), Comfort (reputation, antecedents, experience of other investors, infrastructure) and Cost (service charges and the service standards). You must also ensure that the DP is registered with SEBI.

DIS are like cheque book and you must handle it carefully. You should insist your DP to issue a DIS book (not loose slips). The DIS numbers must be pre-printed and your account number [client id] should be pre-stamped. Do not leave signed blank DIS with anyone and keep the DIS book under lock and key when not in use.

In a public issue, the issuer advises the DP to credit your account with the securities allotted to you. For receiving demat securities in case of purchases from secondary market, you may give a one-time standing instruction to your DP. This standing instruction can be given at the time of account opening or later. Alternatively, you may choose to give separate receipt instruction to your DP for receiving every credit. You should ensure that your broker transfers the securities from its clearing account to your depository account, before the book closure. If the securities remain in the clearing account of the broker, the company will give corporate benefits (dividend or bonus) to the broker. In that case, you will have to collect the benefits from your broker.

After you have sold the securities, you would instruct your DP to debit your account with the number of securities sold by you and credit your broker's clearing account. This delivery instruction has to be given to your DP using the DIS given to you by your DP at the time of opening the account.

The concerned company obtains the details of beneficiary holders and their holdings from the depository. The amount due to you are paid by the company through the ECS (Electronic Clearing Service) facility or by issuing warrants on which your bank account details are printed.

The concerned company obtains the details of beneficiary holders and their holdings from the depository. Your entitlement is credited by the company directly in your depository account.

A depository interfaces with the investors through DPs. It does not charge the investors directly but charges DPs, who are free to have their own charge structure for the investors. However, you should look at the charges levied by a DP in relation to its range and quality of services rendered.

You should approach your DP for any grievances related to depository operations. In case of failure of your DP to resolve your grievance, you can write to your depository. In case depository/depository participant does not redress your grievance adequately, you may write to SEBI