Dematerialisation
Dematerialisation is the process by which a client can get physical certificates converted into electronic balances.
An investor intending to dematerialise its securities needs to have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP. After intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository system, about the request for dematerialisation. If the Issuer/ R&T agent finds the certificates in order, it registers NSDL as the holder of the securities (the investor will be the beneficial owner) and communicates to NSDL the confirmation of request electronically. On receiving such confirmation, NSDL credits the securities in the depository account of the Investor with the DP.
Features
- Holdings in only those securities that are admitted for dematerialisation by NSDL can be dematerialised.
- Only those holdings that are registered in the name of the account holder can be dematerialised.
- Names of the holders of the securities should match with the names given for the demat account.
- If the same set of joint holders held securities in different sequence of names, these joint holders by using 'Transposition cum Demat facility' can dematerialise the securities in the same account even though share certificates are in different sequence of names. e.g., If there are two share certificates one in the name of X first and Y second and another in the name of Y first and X second, then these shares can be dematerialised in the depository account which is in any name combination of X and Y i.e., either X first and Y second or Y first and X second. Separate accounts need not be opened to demat each share certificate. If shares are in the name combinations of X and Y, it cannot be dematerialised into the account of either X or Y alone.
- Check the demat performance of the companies whose shares are to be given for dematerialisation.
- Demat requests received from client (registered owner) with name not matching exactly with the name appearing on the certificates merely on account of initials not being spelt out fully or put after or prior to the surname, can be processed, provided the signature of the client on the Dematerialisation Request Form (DRF) tallies with the specimen signature available with the Issuers or its R & T agent.
- A client may, in the normal course, receive demat confirmation in about 30 days from the date of submission of demat request to the DP.
Procedure
There are special processes for Securities issued by Government of India and simultaneous transmission and demat.
- The client (registered owner) will submit a request to the DP in the Dematerialisation Request Form for dematerialisation, along with the certificates of securities to be dematerialised. Before submission, the client has to deface the certificates by writing "SURRENDERED FOR DEMATERIALISATION".
- The DP will verify that the form is duly filled in and the number of certificates, number of securities and the security type (equity, debenture etc.) are as given in the DRF. If the form and security count is in order, the DP will issue an acknowledgement slip duly signed and stamped, to the client.
- The DP will scrutinize the form and the certificates. This scrutiny involves the following
- Verification of Client's signature on the dematerialisation request with the specimen signature (the signature on the account opening form). If the signature differs, the DP should ensure the identity of the client.
- Compare the names on DRF and certificates with the client account.
- Paid up status
- ISIN (International Securities Identification Number)
- Lock - in status
- Distinctive numbers
- In case the securities are not in order they are returned to the client and acknowledgment is obtained. The DP will reject the request and return the DRF and certificates in case:
- A single DRF is used to dematerialise securities of more than one company.
- The certificates are mutilated, or they are defaced in such a way that the material information is not readable. It may advise the client to send the certificates to the Issuer/ R&T agent and get new securities issued in lieu thereof.
- Part of the certificates pertaining to a single DRF is partly paid-up; the DP will reject the request and return the DRF along with the certificates. The DP may advise the client to send separate requests for the fully paid-up and partly paid-up securities.
- Part of the certificates pertaining to a single DRF is locked-in, the DP will reject the request and return the DRF along with the certificates to the client. The DP may advise the client to send a separate request for the locked-in certificates. Also, certificates locked-in for different reasons should not be submitted together with a single DRF
- In case the securities are in order, the details of the request as mentioned in the form are entered in the DPM (software provided by NSDL to the DP) and a Dematerialisation Request Number (DRN) will be generated by the system.
- The DRN so generated is entered in the space provided for the purpose in the dematerialisation request form.
- A person other than the person who entered the data is expected to verify details recorded for the DRN. The request is then released by the DP which is forwarded electronically to DM (DM - Depository Module, NSDL's software system) by DPM.
- The DM forwards the request to the Issuer/ R&T agent electronically.
- The DP will fill the relevant portion viz., the authorisation portion of the demat request form.
- The DP will punch the certificates on the company name so that it does not destroy any material information on the certificate.
- The DP will then despatch the certificates along with the request form and a covering letter to the Issuer/ R&T agent.
- The Issuer/ R&T agent confirms acceptance of the request for dematerialisation in his system DPM (SHR) and the same will be forwarded to the DM, if the request is found in order.
- The DM will electronically authorise the creation of appropriate credit balances in the client's account.
- The DPM will credit the client's account automatically.
- The DP must inform the client of the changes in the client's account following the confirmation of the request.
- The issuer/ R&T may reject dematerialisation request in some cases. The issuer or its R&T Agent will send an objection memo to the DP, with or without DRF and security certificates depending upon the reason for rejection. The DP/Investor has to remove reasons for objection within 15 days of receiving the objection memo. If the DP fails to remove the objections within 15 days, the issuer or its R&T Agent may reject the request and return DRF and accompanying certificates to the DP. The DP, if the client so requires, may generate a new dematerialisation request and send the securities again to the issuer or its R&T Agent. No fresh request can be generated for the same securities until the issuer or its R&T Agent has rejected the earlier request and informed NSDL and the DP about it.
- Processing of Demat Requests in Case of Account Holders Name not Matching Exactly with Physical Certificates
- Procedure for Transposition cum Demat
- Procedure for Simultaneous Transmission and Demat
- Procedure for Dematerialisation of Government Securities
Precautions
- Holdings in those securities that have not yet been admitted for dematerialisation by NSDL cannot be dematerialised. List of securities admitted for dematerialisation should be verified before defacing the securities.
- Holdings in street name cannot be dematerialised.
- The combination of names of holders as printed on the physical certificate should be identical with the names initiating the dematerialisation request.
- Separate dematerialisation requests will have to be filled for locked-in and free holdings.
- Separate dematerialisation requests will have to be filled for holdings locked-in for different reasons.
- Separate dematerialisation requests will have to be filled for fully paid up and partly paid-up holdings.
- Separate dematerialisation requests will have to be filled for holdings in the different ISINs of a company.
Processing of Demat Requests in Case of Account Holders Name not Matching excatly with Physical Certificate
It was decided in the meeting held by SEBI on December 17, 1998, that demat requests received from client(s) with name(s) not matching exactly with the name(s) appearing on the certificates merely on account of initials not being spelt out fully or put after or prior to the surname, should be processed, provided the signature(s) of the client(s) on the DRF tallies with the specimen signature(s) available with the Issuers or its R & T agent.
To give an example, the shareholder may have opened the depository account in the name of Sushil Ramesh Shah but his name on the share certificate may appear as S. R. Shah or Sushil R Shah etc. Such requests should be treated as good for dematerialisation , provided the DP verifies the signature(s) and finds that it matches. While doing so, the DP should ensure compliance of all the Laws, Rules and Regulations prescribed under the Depositories Act, SEBI Regulations, NSDL Bye Laws, Business Rules and Operational Guidelines.
Procedure for Transmission (Name Deletion) and Dematerialisation to Be Done Together
In case of joint holdings, on the death of any one or more of the jointholder(s), the surviving jointholder(s) can get the name(s) of the deceased deleted from the physical certificate(s) and get the securities dematerialised by following the procedures mentioned below:
- Make a request to the DP for deleting the name(s) of the deceased as per Transmission Form.
- Submit a DRF alongwith the security certificates and the documents mentioned above to the DP.
- On receipt of the documents mentioned above, the DP shall ensure that the certificates submitted by the Client are registered in the name of the Client(s) along with the name(s) of the deceased and the order of the names on the certificate is the same as the Client account.
- The DP while processing the request for name deletion and dematerialisation shall ensure compliance of the Business Rules and forward the same to the Issuer or its R & T Agent.
- On being satisfied with the documents received, the Issuer or its R & T Agent shall carry out the name deletion and then process the dematerialisation request, as per the prescribed procedure.
This is in line with SEBI's norms regard to Good/Bad delivery.
Procedure for Transposition Cum Demat
- If the names of the clients appearing on the security certificates match with the names in which the account has been opened but are in a different order, such securities can be dematerialised by the procedure laid down in the relevant Business Rules i.e., 11.1.5 and 11.1.13.
- The DP shall forward the DRF to the Issuer or its Registrar & Transfer Agent only after ascertaining that the number of certificates annexed with the DRF tallies with the number of certificates mentioned on the DRF. Provided further that in case of transposition cum dematerialisation cases, the DP shall also forward Annexure OA, alongwith the DRF to the Issuer or its Registrar & Transfer Agent.
- The securities which have been dematerialised shall be credited to the account maintained by a DP only when the pattern of holdings in the account of the Client matches with the pattern of holdings as per the security certificates. Provided however that in case where the names appearing on the certificates match with the names in which the account has been opened but are in a different order, the Client can get the security certificates dematerialised by submitting the security certificates alongwith the Transposition Form as per Annexure OA and the Dematerialisation Request Form (DRF) to the DP. The explanation of such pattern of holding is given in Annexure F*.
Annexure F
Pattern of Holding at the Time of Dematerialisation
At the time of dematerialisation of securities, the securities shall be credited to the account of the holders only if the pattern of holding as per the security certificate(s) submitted for dematerialisation or the names of the applicants in the case of any public or rights issue of securities matches with the pattern of holding as per the account maintained with the Participant to which it is credited. Provided however that, in case of transposition and dematerialisation of securities, the securities held by A B and C can be dematerialised in an account opened in the combination of A C & B, B C & A, B A & C, C A & B and C B & A.
Basic Services
Under the provisions of the Depositories Act, NSDL provides various services to investors and other participants in the capital market like, clearing members, stock exchanges, banks and issuers of securities. These include basic facilities like account maintenance, dematerialisation, rematerialisation, settlement of trades through market transfers, off market transfers & inter-depository transfers, distribution of non-cash corporate actions and nomination/ transmission.
The depository system, which links the issuers, depository participants (DPs), NSDL and Clearing Corporation/ Clearing house of stock exchanges, facilitates holding of securities in dematerialised form and effects transfers by means of account transfers. This system which facilitates scripless trading offers various direct and indirect services to the market participants.
Some of the services are as under:
The Financial Kaleidoscope
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