Depository Participant Registration

The depository is an organization that holds securities (like share, Debentures, Bonds, Government Securities, Mutual Funds Units etc) of investors in electronic form at the request of the investors through a registered depository participant. It also provides services related to transactions in securities.

In India there are two Depositories Central depository services limited (CDSL) & National securities depository limited (NSDL).

Scope of Business:

• Services Provided by a Depository
• The opening of DEMAT accounts
• Dematerialization (converting physical securities into electronic form)
• Rematerialisation (that is converting electronic securities into physical form)
• Maintaining records of securities held by the beneficial owner in electronic form.
• Settlement of trades by delivery or receipt of securities form/ in beneficiary account.
• Settlement of off-market transaction between beneficial owners.
• Receiving electronic credit respect of securities allotted by issuers under IPO or otherwise on behalf of DEMAT account holders;
• Receiving non-cash corporate benefits such as allotment of bonus and rights shares or any other non-cash corporate benefits given by the issuers in electronic form on behalf of its DEMAT account holders;
• Pledging of dematerialized securities & facilitating loans against shares;
• Freezing of the DEMAT account for debits, credits, or both

Depository Participant

A Depository Participant is an agent of the depository through which it interfaces with the investor and provides depository services. They act as a mediator between investor and depository. You cannot interact with CDSL or NSDL. You need to be dependent with a Depository Participant to open and maintain your DEMAT account.

Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India, state financial corporations, custodians, stock-brokers, clearing corporations/clearinghouses, NBFCs and registrar to an issue or share transfer agent complying with the requirements prescribed by SEBI can be registered as DP. Banking services can be availed through a bank branch whereas depository services can be availed through a Depository Participant.

Initial Registration of Depository Participant:

An application for the grant of a certificate of initial registration as a participant shall be made to the bond in Form E, through the depository in which the applicant proposes to act as a participant, shall be accompanied by the fee specified.

The depository shall forward to the Board (SEBI) the application in Form E as early as possible, but not later than thirty days along with its recommendations and certifying that the participant complies with the eligibility criteria including adequate infrastructure as provided for in these regulations and the bye-laws of the depository.

Grant of Certificate for Permanent Registration

A participant who has been granted a certificate of initial registration may, three months before the expiry of the period of the certificate of initial registration, make an application for grant of a certificate of permanent registration in Form E, through the depository in which it is a participant.

The participant who has already been granted a certificate of registration or has obtained renewal of certificate of registration, prior to the commencement of the Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulations, 2011, may, three months before the expiry of validity of certificate of registration or before, make an application for grant of a certificate of permanent registration in Form E, through the depository in which it is a participant.

The application under sub-regulation (1) or sub-regulation (2) shall be accompanied by the application fees as specified in Part A of the Second Schedule and be paid in the manner specified in Part B thereof.

The application for grant of a certificate of permanent registration shall be accompanied by details of the changes that have taken place in the information that was submitted to the Board while seeking initial registration or renewal, as the case may be, and a declaration stating that no changes other than those as mentioned in such details have taken place.

The application for permanent registration made under sub-regulation (1) or (2) shall be dealt with in the same manner as if it were a fresh application for grant of a certificate of initial registration.

The Board, on being satisfied that the applicant is eligible, shall grant a certificate of permanent registration in Form F and shall send an intimation to the applicant.

On the grant of a certificate of permanent registration, the participant shall be liable to pay a registration fee as specified in the Second Schedule of these regulations, within a period of fifteen days of receipt of intimation from the Board.

The participant shall pay the annual fee as specified in the Second Schedule of these regulations.

The participant, to keep the registration in force, shall pay the registration fee as specified in Part A of the Second Schedule for every five years from the sixth year of the date of grant of a certificate of permanent registration.

The fee specified in sub-regulation (9) shall be paid three months prior to the expiry of the block for which the fee has been paid.

• As per Regulation 19(a) of SEBI (Depositories & Participants) Regulations, following are the categories that are eligible to become DPs (applicant):

1. A public financial institution

2. A bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934)

3. A foreign bank operating in India with the approval of Reserve Bank of India

4. A state financial corporation established under the provisions of section 3 of the State Financial Corporations Act, 1951 (63 of 1951)

5. An institution engaged in providing financial services, promoted by any of the institutions mentioned in subclause (i), (ii), (iii), (iv), jointly or severally

6. A custodian of securities who has been granted a certificate of registration by the Board under sub-section (1A) of section 12 of the Act

7. A clearing corporation or a clearinghouse of a stock exchange

8. A stockbroker who has been granted a certificate of registration by the Board under sub-section (1) of section 12 of the Act:

• Provided that the stockbroker shall have a minimum net worth of rupees 50 lakhs and the aggregate value of the portfolio of securities of the beneficial owners held in a dematerialized form in a depository through him shall not exceed 100 times of the net worth of the stockbroker.
• Provided further that if the stockbroker seeks to act as a participant in more than one depository, he shall comply with the criteria specified in the first proviso separately for each such depository.
• Provided further that where the stockbroker has a minimum net worth of Rupees Ten crore, the limits on the aggregate value of the portfolio of securities of the beneficial owners held in a dematerialized form in a depository through him shall not be applicable.

9. A non-banking finance company, having a net worth of not less than rupees fifty lakhs

• Provided that such company shall act as a participant only on behalf of itself and not on behalf of any other person
• Provided further that a non-banking finance company may act as a participant on behalf of any other person if it has a net worth of Rs. 50 crore in addition to the network specified by any other authority.

10. A registrar to an issue or share transfer agent who has a minimum net worth of rupees ten crores and who has been granted a certificate of registration by the board under sub-section (1) of section 12 of the Act.

• The Regulations empower NSDL to set its own selection criteria in the Bye-Laws. Therefore, the applicants must also adhere to the following admission criteria stated in NSDL Bye-Laws for becoming DP:
• The applicant in the category of stockbroker should have a minimum Net worth of Rs.3 crore. In case of a non-banking finance company (NBFC) and a registrar to an issue or share transfer agent, minimum net worth as specified in the SEBI Regulations will apply.
• The applicant should not have been convicted in any of the five years immediately preceding the filing of the application in any manner involving misappropriation of funds & securities, theft, embezzlement of funds, fraudulent conversion or forgery.
• The applicant should not have been expelled, barred or suspended by SEBI, self-regulatory organization or any stock exchange. Provided however that, if a period of three years or more has elapsed since such punishment was imposed, the Depository may, in its discretion consider such application.
• The applicant shall be required to furnish information and details of his business history including the background and experience of directors and promoters of the applicant.

Fulfillment of eligibility criteria led down under regulation 19, sub-regulation (a) to (d) of the SEBI (depository & participants) regulation, 1999 and the admission criteria as enumerated in CDSL by law

1. The minimum net worth requirement for a stockbroker to become CDSL depository participant is 2crore (INR)
2. A stockbroker having minimum net worth of not less than 1crore (INR) may be admitted as CDSL depository participant under the category ‘limited depository participant’ subject to condition that they will increase the net worth at least  2crore (INR) as to eat par with existing stockbroker depository participant in terms of net worth requirement. Till such time the depository participant increases the net worth to 2crore (INR) the Depository participant under ‘limited Depository participant’ category will be permitted to open only up to 5000 accounts. Such net worth is computed in the manner specified in operating instructions issued by CDSL from time to time.

The applicant which is complete in all respects and satisfying the above-mentioned threshold criteria shall be considered by the member of CDSL on its merits.