1. What is a depository?
The work of a depository is almost same as the bank. Just like a bank, the depository holds securities- shares, debentures, bonds, units, etc- in electronic form. The depository also offers services related to security transactions.
2. How to avail the services of a depository?
The depository communicates with the investors through the representatives known as Depository Participant. In order to avail the services of the depository, the investor needs to open an account with the DP.
3. What are the advantages of participating in a depository?
The advantages of a depository include:
- Instantaneous transfer of securities
- Eliminates risks that include physical certificates like late delivery, fake securities, etc.
- Decreases the paperwork, involving transfer of securities
- Limits the transaction costs
- Facility for nomination
- By changing the address of the investor, the updated address gets registered with the DP electronically as well as with the companies with whom the investor holds securities. Thus, it resolves the problem of contacting every company for making the changes.
- The DP transmits the securities by eliminating the correspondence with companies.
- Convenient way of folio/account consolidation
- Investments like equity, debt instruments and Government securities are held in a single account
- Shares can get credited into the demat account automatically, through a merger or split, etc.
ABOUT SMIFS LIMITED
1.What are the facilities offered by SMIFS?
- Efficient research team that provides short-term, long-term and derivatives trading calls.
- Low Brokerage for convenient trading and investing in the stock market
- Paperless free demat account opening so that investors can open there demat account easily and start their investment journey
- Easy trading so that investors can trade from anywhere, anytime using advanced trading software – SMIFS Elite
- All-in-one account for investing in equities, derivatives, mutual funds, etc.
- Customized portfolio management services that are adjusted depending upon the investor’s risk-taking capability.
- No charges for auto-square off for Intraday Trading
- Free Call-n-Trade facility to the clients.
- First to apply for IPO, so that investors can start bidding
DEMAT ACCOUNT OPENING
1. What is the way of opening a SMIFS demat account?
Opening a free demat account with SMIFS limited is an easy and fast process.
- Type smifslimited.com, go to ‘Equity Broking’ option and and type your details in the ‘Open Free Demat Account’ option. The investor will be shown a client registration page where they will have to fill their details.
- Type in the details in the required field along with the name and registered mobile number.
- Enter the required documents related to PAN and Aadhaar. Type in the bank details and choose the preferred nominee. Then, upload all the asked documents.
- Select the preferred brokerage scheme and submit the documents.
- Once done, the investor may e-sign into the account by entering the aadhaar number and verifying it with the OTP twice.
- He/she will be sent the Unique Client Code and the web login password once the account has been successfully created.
The investor can also go to the “steps to fill an e-KYC form” for a detailed understanding.
2. Why SMIFS?
Selecting a DP is as simple as selecting a bank. By choosing SMIFS as the depository participant, you shall be benefitted by a lot of things.
- SMIFS offers advanced analytic services and focus on developing long term relationship with clients.
- SMIFS searches for information from reliable sources and ensures that no traces of fraudulent activities are involved.
- SMIFS has achieved the trust of clients for over 30 years. Our firm has been existing since 1993, and has uphold the motto of legacy, growth and trust buildup.
- Our helpdesk services ensure that clients receive the best services along with flawless communication.
3. Are all the Depository Participants same?
As per SEBI regulations, there are a set of eligibility criteria that is to be met by the brokerage firm in order to become a DP. Even though the work of all the DPs is the same, they are all different. The service provided by SMIFS is what separates it from the rest of the DPs.
4. What are the documents required for opening a Demat account with SMIFS?
The documents required for opening a demat account are:
- PAN Card
- Valid e-mail ID
- Aadhaar Card that is linked with the registered phone number
- Updated Bank Statement of the last six-months
- Scanned Signature
- Latest photograph
5. What is in-person verification?
According to SEBI regulations, it is necessary to confirm the applicant’s identification while opening an account. The DP’s staff carries out this action by cross-checking the applicant’s photo with the one that is attached to the account opening form and the photo that can be seen on the PAN card document. The “in-person verification” is necessary for all joint account holders.
6. Can anyone open more than one demat account?
Yes, having more than one demat account is possible. But, an individual cannot have more than one demat account with the same Depository Participant.
7. Is it important to keep a minimum balance of securities in the demat account?
No, it is not necessary to keep some amount in the demat account. Clients can even have demat accounts with zero balance.
8. Why bank details are mandatory while opening an account with SMIFS?
Companies/RTAs are notified about the bank details so that any money owed to the investor (such as dividends, interest, maturation payments, or redemption amounts) is deposited immediately into the bank account.
9. What is the use of a DIS slip in the account opening form?
A Delivery Instruction Slip (DIS) is needed for every debit transfer just as a “Receipt Instruction Slip” is needed for every credit transfer in the demat account. You can avoid giving your DP a receipt instruction every time a credit is anticipated in the account by giving your DP a one-time standing instruction.
10. Can the joint demat account be treated on ‘either or survivor’ basis like a bank account?
No. According to current SEBI regulations, a demat account cannot be run on a “either or survivor” basis like a bank account. All joint holders must sign an instruction against the jointly held demat account.
11. Can all of my securities be transferred to another account of mine under another DP from the existing DP?
Yes, the investor can transfer securities from one demat account under one DP to another demat account under another DP. For this process, a closure form has to be submitted to the DP where the investor would like to close his/her account.
12. What can I do with my SMIFS Demat account?
There are several uses of a SMIFS demat accout.
- The sooner the demat account, the faster one can apply for IPO and NFOs.
- The individual will also receive corporate benefits (bonus, right issues, etc) cash benefits (like dividend declared by the company, interest payable on bond amount, etc) in the demat account.
- The securities held by the investor can be accessed easily through the SMIFS Elite app. Investors can even participate in the lending and borrowing scheme of securities that are left unused in your demat account.
DEMATERIALIZATION OF SECURITIES
1. What is Dematerialization?
Dematerialization refers to change in the way of holding securities from physical form to electronic form. There is no change in ownership of the securities under dematerialization.
2. How to dematerialize security certificates?
Dematerializing security certificates require a demat account.
- For opening a demat account, investors need to fill an e-kyc form and submit it to SMIFS.
- SMIFS is then going to send the demat order to the depository for further processing.
- It will also send the security certificate, the Dematerialization Request Form (DRF) and Demat Request Number (DRN) to the issuer or the RTA. On the other hand, the depository will send the demat request to the issues/RTA.
- The issuer/RTA is then going to send its confirmation or rejection for the request to the depository who then passes this intimation to the DP.
- Finally, it provides the statement of account to the investor. The investor can now open a demat account and store the securities in electronic form.
3. Can share certificates be dematerialized?
All share certificates cannot be dematerialized. A set of conditions should be met to dematerialize them. These are as follows:
- Only those share certificates can be dematerialized that have already been registered by the investor’s name in the records of the issuing company/its RTA.
- The issuer company should be a member of either of the depositories.
- Shares should be free of any charge, or lien or encumbrance.
4. What precautions can be taken before submitting certificates to DP for dematerialization?
Before dematerialization, the following precautions must be taken into account.
- Verify yourself as the registered owner of the securities.
- The pattern of ownership is same as the demat account from where the demat request shall be processed.
- The requested securities are available for dematerialization in NSDL.
- Ensure that the RTA has not stopped the services for the securities that the investor is holding. This list can be checked from https://nsdl.co.in/list-comp.php.
If the criteria match the securities, the investor can dematerialize them with the words ‘Surrender For Dematerialization’. These words shall be carved on a rubber stamp. Finally, the DRF can be submitted to SMIFS or preferred DP for further processing.
5. Is the dematerialization process lengthy?
As per SEBI norms, SMIFS (or any other registered DP) will have to process the request for demat account within 7 days. The issuer/RTA processes this demat request within 15 days. Thus, in total, this transmission of documents takes up to 30 days.
6. Can an investor open a single demat account to store dematerialized securities that are owned both individually and jointly?
No, an investor cannot have the same demat account for storing the securities that are owned individually and jointly. If an investor owns a security that is listed under his/her name and another security that has a joint holder, then the investor will have to open two different accounts- one for storing the securities that are owned individually and the other one for storing the securities that are owned jointly.
7. Is buying a government security in demat form allowed?
Yes. Retail investors can now quickly enter the market for government securities including bonds and Treasury Bills (T-Bills). The Reserve Bank of India does reserve a percentage of new issues for retail investors. You can take part in G-Sec through an auction or purchase already issued securities in the secondary market. For both these cases, an investor may need to visit an authorised bank, main dealer, or stock broker for mentioning the specifics of the demat accounts (DP ID and Client ID).
8. Can tax-free bonds that are under lock-in be dematerialized?
Yes. The tax-free bonds can be dematerialized even if they are under lock-in. Investors must provide SMIFS with a properly completed, signed DRF and bond certificates. Credit will be received by the investor in his/her demat account after the request has been forwarded by SMIFS to the relevant issuer and/or its RTA and gained approval.
9. How can Sovereign Gold Bonds be bought ?
Buying these forms is easy. An investor needs to mention the DP ID and Client ID in the subscription form. Some banks provide the option to apply online (if the investor makes an online payment for the application made, he or she gets an additional discount). Your demat account will be credited with the required number of bonds following RBI’s allotment.
10. Can I convert my Sovereign Gold Bonds into demat form?
Yes, investors can convert their SGB from physical form to demat form by contacting the person through whom they have purchased the SGBs. These people will help in the conversion of the certificate of holdings into demat form.
11. Can dematerialized shares of joint holders having different sequence of names be stored in the joint account of those particular investors?
The joint holders can change the sequence of the names by writing a request to the company. In that case, the names for all the holdings will change. This is called Transportation. Another method to do this is by using the ‘Transportation Cum Demat Facility’. The investors will have to submit a DRF and an additional ‘Transportation Cum Demat Form’ to SMIFS.
1. What is nomination?
A security holder can indicate their preferences for who should get their securities in the event of their death through the easy process of nomination. When opening a demat account, the nomination process for that account can be completed.
2. Who has the right to nominate?
Only those with a demat account, either individually or jointly, are eligible to nominate. Nominations are not permitted from non-individual holders such as societies, trusts, bodies corporate, partnership firms, Hindu Undivided Families, and power of attorney holders.
3. Are joint holders allowed to nominate?
Yes. In the case of accounts with joint holders, nomination is allowed. However, in the event that any joint holders pass away, the remaining joint holder will receive the securities (s). Securities will only be delivered to the nominee in the case of the passing of all joint holders (if nomination given, else to legal heir).
4. Is an NRI allowed to nominate?
The NRI has the power to nominate directly. However, the POA is not allowed to nominate on behalf of the NRI.
5. Is a Minor allowed to nominate?
Minors are not allowed to nominate, even through their guardian.
6. Who is eligible for becoming a nominee?
Any individual other than society, trust, body corporate, partnership firm and Hindi Undivided family who belong to the non-individual group cannot become a nominee for the demat account.
7. How many nominees can be there?
Yes, currently one demat account can have up to three nominations. If there are two or three nominees listed, it is also necessary to provide the percentage (%) in which each security is to be transferred upon the account holder’s passing.
8. Is a minor allowed to be a nominee?
A minor can be allowed to become a nominee for demat account. In that case, the details about the nominee’s guardian should also be mentioned.
9. Can an investor choose individual nominees for every security in a demat account?
Nominations can be made based on accounts, not security. This indicates that any securities held in the demat account must be transferred to the chosen nominee(s) in the pre-registered proportion in the event of the account holder’s death.
If an investor wants separate nominees, they should consider storing the securities in multiple demat accounts and mentioning the nominee(s) of their choice.
10. Is an NRI allowed to be a nominee?
Yes, NRIs are permitted to serve as nominees in demat accounts under the provisions of the applicable foreign exchange legislation.
11. How to appoint a nominee?
When opening an account, the holders of demat accounts must include information about the nominee(s) in the account opening form. In one demat account, a nominee might be one of up to three different people.
12. Can nomination be changed?
An investor can change his/her nominee anytime by filling up a nomination form and submitting it to the Depository Participant’s office.
13. Is it mandatory to nominate a demat account?
A demat account does not require nomination. However, it is strongly advised to list the nominee in the demat account. It makes the process of transmission extremely simple and quick in the tragic death of the account holder. The investor must say “I/We do not desire to make a nomination” if he/she do not want to name any nominees when the account is opened.
TRANSMISSION OF SECURITIES
1. What is transmission in relation to demat account?
A deceased account holder’s shares may be transferred to surviving joint holders, legal heirs, or the deceased account holder’s nominee through a legal process called transmission. Dematerialized holdings have a reasonably simple transmission process because the required documents must be submitted to DP in order to complete the requirements for all securities held in a demat account.
2. How to transfer securities to the nominee in case of the death of the sole holder?
The nominee must submit a properly completed transmission form and a copy of the death certificate that has been duly attested by a Notary Public or a Gazetted Officer in order to transmit securities in the event of the death of the only holder. A copy of the claimant’s Client Master Report (confirmed by the relevant DP) is also needed if the claimant’s account is not with the same Participant. The DP will send the securities to the nominee’s demat account after these documents have been verified.
3. What happens to the demat account in case there is no nominee?
The securities would then be transferred to the legal heir(s)’ account, as may be decided by an order of the appropriate court. The following paperwork is necessary for this:
- Duly filled in Transmission Form.
- An attested copy of the death certificate from a Notary Public or a Gazetted Officer
- A copy of the succession certificate with the proper notarization from a notary public, a registrar, or another
- A order of court of competent jurisdiction when a deceased person didn’t leave a will
- A duly attested letter of administration by the Notary Public or the Gazetted Officer.
- If the claimant does not have an account in the same DP as the sole holder, a copy of the documents containing details of the claimant’s account has to be provided.
In case the transmission value is less than ₹5,00,000, the DP may process the request in the following manner.
- Duly filled in Transmission Form.
- Attested copy of the death certificate by a Notary Public or a Gazetted Officer
- Letter of indemnity (as mentioned in the format)
- No Objection Certificate as mentioned in the family Settlement Deed
- Affidavit (as mentioned in the format)
- Account documents of the claimant in case he/she does not have an account with the same DP as the sole holder.
4. How the transmission does happen in case of death of one or more joint holders?
In this scenario, regardless of the nomination, the securities would be transferred to the surviving holder(s). For example, if the account is held jointly by Mr. A, Mr. B, and Mrs. C, the securities will be transferred to Mr. A as the surviving holder in the event that Mr. B and Mrs. C pass away. The DP would require the following papers from the surviving holder(s):
- Properly completed Transmission Form.
- A properly attested copy of the death certificate from a Notary Public or a Gazetted Officer
The DP will transfer the securities to the surviving holder(s) account and shut the dead account after validating the aforementioned documentation and being satisfied.
5. What is ‘Transmission cum Demat’?
When one of the joint holders listed on the securities certificate passes away and the surviving holder(s) wants to have the shares sent in their name in demat form, the “Transmission cum Demat” facility might be very helpful. This feature allows for the simultaneous accomplishment of removing the name of a deceased joint holder.
SETTLEMENT OF MARKET TRADES AND TRANSFER OF SECURITIES
1. How to buy securities?
The process of buying securities involves:
- The stockbroker is given buying instructions
- Once the buy order has been executed, investors shall receive confirmation of execution and pay the requisite amount to your stockbroker for meeting his/her (funds) pay-in requirement.
- On the day that securities are paid out, your broker receives credit for the securities in its clearing account.
2. Who are market traders and off market traders?
A “Market Trade” is any transaction completed through a clearing house. These trades are carried out on the platform of a recognized stock exchange. A trade that is resolved directly between the two parties, outside the clearing organization, is referred to as a “Off Market Trade.”
3. What is IDT? Is it possible to transfer any ISIN to other depository?
“Inter Depository Transfer” refers to the transfer of securities from one depository to another holding demat accounts for the securities (IDT). For ISINs that are active in both depositories, IDT is conceivable.
4. What is market type and settlement number?
Distinct transactions take place on every stock exchange through various trade windows. These windows can be recognised by a specific pairing of a settlement number and a market type. The delivery instruction sheet must include the relevant market type and settlement number (together referred to as settlement details in the depository system) for the pay-in obligations to be paid properly. The contract notice issued by the DP shall contain the specifics.
5. What is T+2 rolling cycle?
T+2 or Transaction+2 days refers to the time that securities require to be transferred to the demat account. The day on which the trading takes place is called Transaction and the rest two days are to complete this transaction.
6. How to know about the deadline for submitting the instruction slips for pay in?
The deadlines for submitting delivery instruction slips will be specified to the investor via the DP For further reference, these are often printed in the DIS booklet that is provided by the DP.
7. At what time should the investor receive the securities after buying from the broker?
The securities should be received by the client within one working day.
8.What is the significance and acceptance of the instruction slip on ‘ At client’s risk’ basis by the DP?
The deadlines for submitting delivery instruction slips are set by each DP. The DP can accept the instruction slip of the client with limited accountability for execution in the depository system if it comes to them after the deadline has passed.
In these situations, DPs stamp the instruction slip with a notation such as “Received late, Subject to best efforts” or “Late, received at Client’s Risk” on both the client copy and the office copy. In case the DP is unable to correctly carry out the client’s late-received instruction in the depository system and the client fails to meet its pay-in requirement, resulting in financial loss (auction fees, etc.), DP cannot be held liable for such loss.
9. What precautions should be taken in respect to the DIS ?
The DIS is similar to that of the cheque book. The following precautions should be taken into consideration.
- Make sure the DP provides with a DIS book. Accept no loose slips (unless required so in urgent situations).
- Make sure that each DIS has a pre-printed serial number.
- Make sure that each DIS has the Client ID pre-stamped or pre-printed.
- Do not give access to the DIS. When required, fill it out and provide it to the respective DP.
- Safely store the DIS book. Please write to the DP once in case the slips are lost or misplaced.
Please remember to cross off any lines or spaces on the DIS that is not required, before giving it to the DP in order to prevent misuse by anyone. This is especially important if there are places for more than one instruction to be mentioned.
Before giving the instruction slip to the DP, please make sure it is correctly completed with all necessary information and signed by all joint holders.
10. What is meant by ‘execution date’ that is given in the delivery slip?
The execution date is the day on which the account will really be debited for the securities. The instruction must be entered by DP in the depository system to guarantee that it is performed on the execution date indicated on the delivery instruction slip.
The client may provide the instructions before-hand but the account will be debited of the securities only on the mentioned date in the DIS.
11. What is the benefit of providing a delivery instruction with a future existing date?
By providing a future dated instruction, the lack of time or last-minute rush can be avoided. The client can also be ensured that the securities are transferred on a previously known fixed date.
12. What is the significance of ‘Reason/Purpose’ and ‘Consideration’ in relation to off market transfers?
According to SEBI regulations, the delivery instruction slip submitted for an off-market transfer must include the reason or purpose for the transfer as well as the consideration for the transfer.
If the reason for the transfer is a “off-market sale,” the client must also include the following information in addition to the amount of consideration:
- Payment date.
- payment method (cash, cheque or electronic payment).
If a cheque or electronic payment is being made, the transferee’s name, bank account number, bank name, transaction reference number, or check number, depending on whether the payment is being made electronically or by check, must be provided.
PLEDGING AND HYPOTHECATION OF SECURITIES
1.What is pledging of shares?
Pledging involves committing the shares that a person (the pledger) owns to another person (the pledgee) as security or collateral for the exposure that the pledgee has accepted. In order to obtain a loan against shares, the concerned shareholder typically pledges shares.
2. How to pledge shares to avail loan against securities facility offered from the bank?
The steps to do so are as follows:
- The investor will have to deal with the terms of loan amount, tenure, rate of interest, securities that are offered as collateral, etc. Since such commercial aspects are matters of mutual negotiation, they lie outside the purview of Depository.
- Both the pledger and the pledgee should have demat accounts with the same depository (the DPs can vary).
- The pledger need to initiate the pledge by filling up a ‘Pledge Initiation Instruction Slip’ and submitting it to the Depository Participant.
- After processing the instructions, the details of the investor shall be visible to the DP of the bank. The pledger will also need to submit a ‘Pledge Conformation Instruction Slip’ to its DP or may opt for an automatic pledge confirmation facility in the demat account. Once this instruction has been executed, the pledger will be created in the depository system.
3. What effect does creation of pledge have on securities?
Once the instruction has been initiated, the underlying securities shall remain blocked in the demat account of the pledger. He/she shall not be allowed to dispose those securities till the block remains.
4. After the loan is repaid, does the pledger gets the securities in his/her demat account as free balance?
Once the loan is repaid, the pledger will have to submit a ‘Pledge Closure Initiation Slip’ to its DP. After the information is received by the pledgee, he/she submits a ‘Pledge Closure Confirmation Instruction’ to its DP. The pledgee may also submit this instruction without the approval of the pledger. Once the pledge is closed, the underlying securities are returned to the respective accounts.
5. Can the securities offered in the pledge be changed?
The securities offered in the pledge can be changed only is the pledgee allows to. In such cases, the pledger will have to request for the creation of pledge and the previous pledge will have to be closed.
6. Who shall receive the dividends upon the pledged securities?
The pledger shall receive all the dividends for the underlying securities for he/she is still the beneficial owner of the securities. In case the pledger is unable to repay the loans (the pledge is invoked), the pledgee becomes the beneficial owner of the securities.
7. How the bonus shares for the pledged shares are will be distributed?
While the shares are pledges, any bonus share will enter the pledgers’ account, marked as pledged. After the pledge is closed, all the shares, including the bonus shares will be credited to the pledger’s account as free balances. Only is the pledge is invoked, the pledgee becomes the owner of the shares.
8. What is the difference between Pledging and Hypothecation of securities?
The only difference between pledging and hypothecation is that the pledge can be invoked by a leader in case of pledging. Hypothecation, on the other hand, asks for the consent of the borrower before the invocation takes place.
9. Is a pledgee bank necessary for separate depository account for each branch?
The pledger and pledgee should have their own account at the depository. The pledgee bank can have a single account for all the branches or separate account for different branches (irrespective of same or different DP).
10. In case the pledgee is a DP, can he/she have multiple house accounts, i.e., single account for each branch?
The pledgee is allowed to have multiple house accounts, i.e., one house account for every branch.
11. What precaution should a pledger take before disbursing loan?
The pledgee can disburse a loan and credit it only if the DP of the pledgee confirms its creation. The pledgee shall receive the confirmation after obtaining a report from the DP and verifying the creation of pledge.
12. Once the loan is repaid, how is the pledge closed in the depository system?
Once the loan is repaid, the pledger instructs its DP to close the pledge by submitting a ‘Pledge Form’ where the option ‘close pledge’ is ticked. The pledgee will also instruct its DP to close the pledge by submitting a ‘Pledge Form’ with a tick on ‘Confirm Closure Of Pledge’. Thus, the pledge is closed upon the execution of the DP of the both the pledger and the pledgee. No pledge can be closed with only the consent of the pledger’s DP.
13. What will happen to the corporate actions like the split mergers, consolidation, etc ?
All the shares coming from the corporate actions like the split mergers, consolidation, etc shall be credited to the pledger’s account with the shares pledged in the name of the pledgee.
14. How to substitute for pledged securities?
The securities that are to be substituted should be created first. Later, the earlier pledge can be closed.