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TMI BlogMaster Circular for DepositoriesX X X X Extracts X X X X X X X X Extracts X X X X ..... rifications relating to mandatory requirement of PAN 1.3 Simplification of demat account opening process (DP-BO Rights and Obligation Document) 1.4 Opening of demat account in case of HUF 1.5 Operation of minor s demat account 1.6 Facility for a Basic Services Demat Account (BSDA) 1.7 Change of Name in the Beneficial Owner (BO) Account 1.8 Fees/Charges to be paid by BO 1.9 Safeguards on transfer of securities in dematerialized mode 1.10 Delivery Instruction Slip (DIS) Issuance and Processing 1.11 Transmission of shares 1.12 SMS alerts for demat accounts operated by Power of Attorney 1.13 Exemption from sending quarterly statements of transactions by depository participants (DPs) to clients in respect of demat accounts with no transactions and no security balances 1.14 Discontinuation of sending transaction statements by depository participants to clients 1.15 Exemption to Depository Participants (DPs) from providing hard copies of transaction statements to BOs 1.16 Transfer of funds and securities from Clearing Member pool account to BO Account 1.17 Consolidated Account Statement (CAS) for all securities assets Section - 2: Depositor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CP) and Disaster Recovery (DR) 4.20 (Information Technology) IT Governance For Depositories 4.21 Guidelines for inspection of Depository Participants (DPs) by Depositories 4.22 Activity of Demat of warehouse receipts 4.23 Voting rights in respect of securities held in pool account 4.24 Risk Management Policy at the Depositories SCHEDULE List of Circulars Communications Section 1: Beneficial Owner (BO) Accounts 1.1 Opening of BO Account by non body corporates 1.1.1 Proof of Identity (PoI) i. Permanent Account Number (PAN) to be the sole identification number for all transactions in the securities market Reference circular MRD/DoP/Cir-5/2007 dated April 27, 2007 With effect from July 02, 2007, PAN is the sole identification number for all transactions in the securities market, irrespective of the amount of transaction. A copy of the PAN card with photograph may be accepted as Proof of Identity. In this regard, intermediaries shall:- a. Put necessary systems in place so that the databases of the clients and their transactions are linked to the PAN details of the client. b. Build necessary infrastructure to enable accessibilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance Copy. b. Utility bills like Telephone Bill (only land line), Electricity bill or Gas bill - Not more than 3 months old. c. Bank Account Statement/Passbook -- Not more than 3 months old. d. Self-declaration by High Court and Supreme Court judges, giving the new address in respect of their own accounts. e. Proof of address issued by any of the following: Bank Managers of Scheduled Commercial Banks/Scheduled Co-Operative Bank/Multinational Foreign Banks/Gazetted Officer/Notary public/ elected representatives to the Legislative Assembly/Parliament/Documents issued by any Govt. or Statutory Authority. f. Identity card/document with address, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities and Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members. g. For FII/sub account, Power of Attorney given by FII/sub-account to the Custodians (which are duly notarized and/or apostiled or consularised) that gives the registered address should be taken. h. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 The demat accounts for which PAN details have not been verified are suspended for debit until the same is verified with the Depository Participant (DP). With effect from August 16, 2010 such PAN non-compliant demat accounts were also suspended for credit other than the credits arising out of automatic corporate actions. It was clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions would not be allowed into such accounts. 1.2.2 Central and State Government and officials appointed by Courts Reference Circular MRD/DoP/Cir-20/2008 dated June 30, 2008 PAN card may not be insisted upon in case of transactions undertaken on behalf of Central Government and/or State Government and where transactions are conducted by officials appointed by Courts e.g. Official liquidator, Court receiver etc. Reference Rule 114C (1)(c) of Income Tax Rules However DPs, before implementing the above exemption, shall verify the veracity of the claim of the organizations by collecting sufficient documentary evidence in support of their claim for such an exemption. 1.2.3 Investors in Sikkim Refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 1.2.8 NRI/PIOs Reference Circular MRD/DoP/Dep/SE/Cir-17/06 dated October 27, 2006 Citizens of India residing outside India, foreign citizens and other persons (like companies/ trusts/ firms) having no office of their own in India may obtain PAN card based on the copy of their passport as ID proof and a copy of passport/ bank account in the country of residence as address proof, based on the Directorate of Income Tax (Systems) guidelines. Reference Income Tax (Systems) PAN Circular No. 4 dated October 11, 2006 1.3 Simplification of demat account opening process Reference Circular SEBI/MIRSD/ 12/2013 dated December 04, 2013 i. SEBI has taken a number of steps in the recent past to simplify the Account opening and KYC process in the securities markets. In continuation of the efforts in the same direction, it has now been decided in consultation with both the Depositories and Associations of stock brokers and Depository Participants to further simplify and rationalize the demat account opening process. ii. The existing Beneficial Owner-Depository Participant Agreements shall be replaced with a common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DP at the time of opening the demat account or furnished to the DP from time to time. Fees/Charges/Tariff 5. The Beneficial Owner shall pay such charges to the DP for the purpose of holding and transfer of securities in dematerialized form and for availing depository services as may be agreed to from time to time between the DP and the Beneficial Owner as set out in the Tariff Sheet provided by the DP. It may be informed to the Beneficial Owner that no charges are payable for opening of demat accounts 6. In case of Basic Services Demat Accounts, the DP shall adhere to the charge structure as laid down under the relevant SEBI and/or Depository circulars/directions/notifications issued from time to time. 7. The DP shall not increase any charges/tariff agreed upon unless it has given a notice in writing of not less than thirty days to the Beneficial Owner regarding the same. Dematerialization 8. The Beneficial Owner shall have the right to get the securities, which have been admitted on the Depositories, dematerialized in the form and manner laid down under the Bye Laws, Business Rules and Operating Instructions of the depositories. Separate Accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o time. Manner of Closure of Demat account 17. The DP shall have the right to close the demat account of the Beneficial Owner, for any reasons whatsoever, provided the DP has given a notice in writing of not less than thirty days to the Beneficial Owner as well as to the Depository. Similarly, the Beneficial Owner shall have the right to close his/her demat account held with the DP provided no charges are payable by him/her to the DP. In such an event, the Beneficial Owner shall specify whether the balances in their demat account should be transferred to another demat account of the Beneficial Owner held with another DP or to rematerialize the security balances held. 18. Based on the instructions of the Beneficial Owner, the DP shall initiate the procedure for transferring such security balances or rematerialize such security balances within a period of thirty days as per procedure specified from time to time by the depository. Provided further, closure of demat account shall not affect the rights, liabilities and obligations of either theBeneficial Owner or the DP and shall continue to bind the parties to their satisfactory completion. Default in payment of charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et out in this document, the DP and the Beneficial owner shall be entitled to exercise any other rights which the DP or the Beneficial Owner may have under the Rules, Bye Laws and Regulations of the respective Depository in which the demat account is opened and circulars/notices issued there under or Rules and Regulations of SEBI. 27. The provisions of this document shall always be subject to Government notification, any rules, regulations, guidelines and circulars/ notices issued by SEBI and Rules, Regulations and Bye-laws of the relevant Depository, where the Beneficial Owner maintains his/ her account, that may be in force from time to time. 28. The Beneficial Owner and the DP shall abide by the arbitration and conciliation procedure prescribed under the Bye-laws of the depository and that such procedure shall be applicable to any disputes between the DP and the Beneficial Owner. 29. Words and expressions which are used in this document but which are not defined herein shall unless the context otherwise requires, have the same meanings as assigned thereto in the Rules, Bye-laws and Regulations and circulars/notices issued there under by the depository and /or SEBI. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or propose to have only one demat account where they are the sole or first holder. ii. Individuals having any other demat account/s where they are not the first holder shall be eligible for BSDA in respect of the single demat account where they are sole or first holder. iii. The individual shall have only one BSDA in his/her name across all depositories. iv. Value of securities held in the demat account shall not exceed Rupees Two Lakhs at any point of time. 1.6.3 Option to open BSDA : The DP shall give option: i. To open BSDA to all eligible individuals who open a demat account after the date of applicability of this circular; ii. To all the existing eligible individuals to convert their demat account into BSDA on the date of the next billing cycle based on value of holding of securities in the account as on the last day of previous billing cycle. 1.6.4 Charges : i. The charge structure may be on a slab basis as indicated below: a. No Annual Maintenance Charges (AMC) shall be levied, if the value of holding is upto ₹ 50,000. b. For the value of holding from ₹ 50,001 to ₹ 200,000, AMC not exceeding ₹ 100 may be charged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be issued at the time of account opening. vi. All other conditions as applicable to regular demat accounts, other than the ones mentioned in this circular shall continue to apply to basic services demat account. 1.6.6 Rationalisation of services with respect to regular accounts . In partial modification of the earlier directions, the following rationalisation measures shall be available for regular demat accounts: i. Accounts with zero balance and nil transactions during the year : DP shall send atleast one annual physical statement of holding to the stated address of the BO in respect of accounts with no transaction and nil balance even after the account has remained in such state for one year. The DP shall inform the BO that if no Annual Maintenance Charge (AMC) is received by the DP, the dispatch of the physical statement may be discontinued for the account which continues to remain zero balance even after one year. ii. Accounts which become zero balance during the year : For such accounts, no transaction statement may be sent for the duration when the balance remains nil. However, an annual statement of holding shall be sent to the BO. iii. Accounts with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfers all the securities lying in his account to another branch of the same DP or to another DP under the same depository or another depository, provided the BO Account(s) at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership. 1.8.5 Account Maintenance Charges collected upfront on annual/ half yearly basis on demat accounts Reference Circular MRD/DP/20/2010 dated July 1, 2010 i. In the event of closing of the demat account or shifting of the demat account from one DP to another, the AMC collected upfront on annual/half yearly basis by the DP, shall be refunded by the DP to the BO for the balance of the quarter/s. For instance, in case annual AMC has been paid by the BO and if the BO closes/shifts his account in the first quarter, he shall be refunded the amount of the balance 3 quarters i.e. 3/4th of the AMC. Likewise, if a BO closes/shifts his account in the third quarter, he shall be refunded the amount for the balance one quarter i.e. 1/4th of the AMC. ii. For the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n authorised DP official v. The DP shall also ensure that a new DIS booklet is issued only on the strength of the DIS instruction request slip (contained in the previous booklet) duly complete in all respects, unless the request for fresh booklet is due to loss, etc., as referred to in clause (c) above vi. The DPs shall put in place appropriate checks and balances with regard to verification of signatures of the BOs while processing the DIS. vii. The DPs shall cross check with the BOs under exceptional circumstances before acting upon the DIS. viii. The DPs shall mandatorily verify with a BO before acting upon the DIS, in case of an account which remained inactive i.e., where no debit transaction had taken place for a continuous period of 6 months, whenever all the ISIN balances in that account (irrespective of the number of ISINs) are transferred at a time. However, in case of active accounts, such verification may be mandatory only if the BO account has 5 or more ISINs and all such ISIN balances are transferred at a time. The authorized official of the DP verifying such transactions with the BO, shall record the details of the process, date, time, etc., of the verific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall utilize the archived scanned images for off-site inspection. xi. Provisions of this circular shall not be applicable for the instructions received from the clients by the DPs electronically in a manner approved by the Depository. xii. Once a new DIS booklet is issued to a BO as per provisions of this circular, old DIS issued to such a BO shall not be accepted by the DP. A period of one month may be given for receipt of DIS by the BOs. The DPs may accept old DIS during this transit period. Reference: CIR/MRD/DP/22/2014 dated July 04, 2014 All DIS issued prior to this circular shall be phased out within a period of 2 years from the date of this circular. The measures listed above under the head 'Monitoring of DIS' shall be made applicable to the DIS issued as per the provisions of this circular. 1.11 Transmission of shares Reference: MRD/DoP/Dep/VM/182963/2009 dated November 12, 2009, Reference: CIR/MIRSD/10/2013 dated October 28, 2013 1.11.1 In cases of transmission of shares of a deceased security holder, where the shareholding in the BO account of the deceased member, as calculated on the date of application for transmission, is within the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal mode: i. Where the securities are held in single name with a nominee, STAs/issuer companies shall follow the standardized documentary requirement as given in Annexure A. ii. Where the securities are held in single name without a nominee, the STAs/issuer companies shall follow, in the normal course, the simplified documentation as given in Annexure A, for a threshold limit of ` 2,00,000 (Rupees Two lakh only) per issuer company. However, the Issuer companies, at their discretion, may enhance the value of such securities. 1.11.7 The timeline for processing the transmission requests for securities held in dematerialized mode and physical mode shall be 7 days and 21 days respectively, after receipt of the prescribed documents. 1.11.8 To improve the awareness of nomination facility, all Registrars to an Issue and Share Transfer Agents shall publicize nomination as an additional right available to investors, while sending communications to the investors. Annexure A Documentary requirement for securities held in physical mode 1 For securities held in single name with a nominee: i. Duly signed transmission request form by the nominee. ii. Original or Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are complied. c. No Annual Maintenance Charges are levied for such an account. d. Information which is required to be disseminated by Participants by way of a note in the Transaction Statements will be required to be communicated to such Clients separately. e. The Internal Auditor of the Participant shall comment in its internal audit report on compliance of the aforesaid requirements. ii. Further, depository may like to consider whether, DPs should send a consolidated Transaction Statements for the entire financial year in case of the BOs to whom quarterly Transaction Statements are not sent. 1.14 Discontinuation of sending transaction statements by depository participants to clients Reference: MRD/NSDL/VM/158886 /2009 dated March 30, 2009 SEBI allowed discontinuation of sending transaction statements by depository participants to clients subject to the following conditions: i. Transaction statements were returned undelivered on three consecutive occasions. ii. The depository participant (DP) maintains proof that the transaction statements were returned undelivered. iii. The transaction statements were returned undelivered for the reasons whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t beyond the above period shall not be eligible either for delivery in the subsequent settlement(s) or for pledging or stock lending purpose, until the same are credited to the beneficiary accounts. iii. The securities lying in the Clearing member s pool account beyond the specified time period shall be identified based on the settlement number. The clearing corporation/houses of the stock exchanges shall provide the settlement-wise details of securities to the depositories and the depositories shall maintain the settlement-wise records for the purpose. iv. Further, stock exchanges shall execute direct delivery of securities to the investors. Clearing corporation/clearing house (CC/CH) shall ascertain from each clearing member, the beneficial account details of their respective clients due to receive pay out of securities. Based on this, the CC/CH shall send pay out instructions to the depositories so that the client receives pay out of securities directly to the extent of instructions received from the respective clearing members. To the extent of instruction not received, the securities shall be credited to the CM pool account. 1.17 Consolidated Account Statement (CAS) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh email, option shall be given to the investor to receive the CAS in physical form at the address registered in the Depository system. vii. A proper grievance redressal mechanism shall be put in place by the depositories and the AMCs/MF-RTAs which shall also be communicated to the investors through CAS. AMCs/MF-RTAs would be accountable for the authenticity of the information provided through CAS in respect of MF investments and timely sharing of such information with Depositories. The Depositories would be responsible for the timely dispatch of CAS to the investors serviced by them and the demat account information. viii. The depositories and the AMCs/ MF-RTAs shall ensure data integrity and confidentiality in respect of the shared information. The depositories shall utilise the shared data only for the purpose of providing CAS and shall not share the same with their Depository Participants. Where Depositories are required to share such information with unregulated entities like third party printers, the depositories shall enter into necessary data confidentiality agreements with them. ix. The CAS shall be implemented from the month of March 2015 with respect to the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternal control systems to ensure that all branches exercise due diligence in opening accounts, complying with KYC requirements, in ensuring systems safety in complying with client instructions, manner of uploading client instructions, in verifying signatures and maintaining client records, etc. DPs shall also ensure that the branches are suitably integrated. ii. Depositories shall examine the adequacy of the above mechanisms during their inspections of DPs. The Depositories shall also carry out surprise inspections/ checks of the DP branches apart from the regular inspection of the DPs. Depositories shall also put in place appropriate mechanisms for monitoring opening of branches by DPs. 2.2 Printing of Grievances Redressal Mechanism on Delivery Instruction Form Book 45 To promote investor awareness regarding mechanism for redressing investor grievances, the information placed below shall be printed on the inside back cover of the Delivery Instruction Form (DIF) Book issued by all Depository Participants. In case you have grievances against a listed company or intermediary registered with SEBI, you should first approach the concerned company or interm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egional Office, Unit No: 002, Ground Floor, SAKAR I, Near Gandhigram Railway Station, Opp. Nehru Bridge Ashram Road, Ahmedabad - 380 009 Tel : 079-26583633-35 ( [email protected] ) For more information visit our website - http://scores.gov.in SECTION 3: Issuer Related 3.1 Charges paid by Issuers Reference Circular MRD/DoP/SE/Dep/Cir-2/2009 dated February 10, 2009 and Circular SEBI/MRD/SE/DEP/Cir-4/2005 dated January 28, 2005 , Reference Circular CIR/MRD/ DP/05/2011 dated April 27, 2011 i. With effect from April 27, 2011 depositories may levy and collect the charges towards custody from the issuers, on the basis of average no. of folios (ISIN position) during the previous financial year, as per the details given below: ii. Issuers to pay @ ₹ 8.00 (*) per folio (ISIN position) in the respective depositories, subject to a minimum as mentioned below: Nominal value of admitted securities (Rs.) Annual Custodial Fee payable by a Issuer to each Depository (Rs.) (*) Upto 5 crore 6,000 Above 5 crore and upto 10 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistrar and Share Transfer Agent 3.3.1 Appointment of a single agency for share registry work Reference Circular D CC/FITTC/Cir-15/2002 dated December 27, 2002 All work related to share registry pertaining in terms of both physical and electronic shares shall be maintained at a single point i.e. either in-house by the company or by a SEBI registered Registrar and Transfer Agent. 3.3.2 Inter-Depository transfers Reference Circular no. SMDRP/Policy/Cir-28/99 dated August 23, 1999 In case of inter-Depository transfers of securities, the Registrars shall communicate the confirmation of such transfers within two hours, failing which such transfers shall be deemed to have been confirmed. The Registrars shall not reject inter-Depository transfers except where i. A Depository does not have adequate balance of securities in its account or ii. there is mismatch of transfer requests from the Depositories. 3.3.3 Common Registrars and Share Transfer agents Reference Circular SMDRP/Policy/Cir-28/99 dated August 23, 1999 Every company shall appoint the same Registrars and Share Transfer agents for both the depositories. 3.3.4 Dematerialisation reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the respective investor. In this regard, Depositories shall ensure that the following information is provided to the domestic custodian holding the underlying shares on a regular basis: i. Total number of shares at the beginning of the month ii. Number of shares transferred into the account (credited) during the month iii. Number of shares transferred out of the account (debited) during the month. iv. Balance at the end of the month. This service can be availed of only by foreign investors other than the OCBs. 3.6 Electronic Clearing System (ECS) facility 3.6.1 Use of ECS for refund in public/ rights issues. Reference Circular SEBI/MRD/DEP/Cir-3/06 dated February 21, 2006 and circular SEBI/CFD/DIL/DIP/29/2008/01/02 dated February 1, 2008 For locations where facility of refund through ECS is available details of applicants shall be taken directly from the database of the depositories in respect of issues made completely in dematerialised form. Accordingly, DPs shall maintain and update on real time basis the MICR (Magnetic Ink Character Recognition) code of Bank branch of BOs and other bank details of the applicants in the database of deposito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re available in the database of depositories. b. For investors that hold physical share / debenture certificates, companies or their RTI STA shall take necessary steps to maintain updated bank details of the investors at its end. iii. In cases where either the bank details such as MICR (Magnetic Ink Character Recognition), IFSC (Indian Financial System Code), etc. that are required for making electronic payment are not available or the electronic payment instructions have failed or have been rejected by the bank, companies or their RTI STA may use physical payment instruments for making cash payments to the investors. Companies shall mandatorily print the bank account details of the investors on such payment instruments. iv. Depositories are directed to provide to companies (or to their RTI STA) updated bank details of their investors. 3.7 Withdrawal by issuers from the depository Reference: MRD/DoP/NSDL/VM/ 162378 /2009 dated May 06, 2009 i. As regards voluntary withdrawal by issuers from the depository, it is informed that listed companies may not be allowed to withdraw from the depository system unless they delist their securities from the stock excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les to the Exchange / Clearing House / Clearing Corporation latest by 11:00 a.m. on T+2. e. Pay-out of securities by the Exchange / Clearing House / Clearing Corporation to the Depositories shall be executed by 1:30 p.m. on T+2. f. Pay-out of securities shall be completed by the Depositories by 2:00 p.m. on T+2. iii. All instructions received by the DPs shall have an execution date, which may be either a current date or a future date. Instructions shall be valid till the pay-in deadline or till 'end of day' (EOD) of the execution date, whichever is earlier. DPs shall ensure that the validity period of instructions is brought to the notice of the client while accepting the instructions. In casethe client account does not have sufficient balance before pay-in deadline or till EOD, such instructions shall fail. 4.2 Settlement of transactions in case of holidays Reference Circular SEBI/MRD/Policy/AT/Cir- 19/2004 dated April 21, 2004 Due to lack of uniformity of holidays and force majeure conditions which necessitate sudden closure of one or more Stock Exchanges and banks in a particular state, result in situations where multiple settlements have to be comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the DPs shall execute the non pay-in related instructions on the same day or on the next day of the instruction. Further, pending such amendment, suitable instructions may be issued to DPs to adhere to such time limit. iii. The above clause may be suitably incorporated in the DP-BO agreement while opening new accounts. 4.4 Approval of amendments to Bye Laws / Rules of Stock Exchanges and Depositories Reference Circular LGL/Cir-2/2003 dated February 19, 2003 i. Depositories and exchanges shall submit the following information while seeking SEBI approval for amendment to Bye Laws/ Rules/ Regulations and amendments thereto: a. The objective/purpose of amendments. b. Whether the amendment is consequential to any directive/circulars/ guidelines from SEBI/ Government and the details thereof. c. Whether such amendments necessitate any consequential amendments to any other Bye Laws/ Rules/ Regulations. d. The proceedings of the Governing Board or Governing Council, as the case may be, wherein these proposed amendments were approved by the Exchanges/ Depositories. e. If documents other than Bye Laws/ Rules/ Regulations are sent for approval, the justificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the securities markets, namely Stock Exchanges, Depositories and Clearing Corporations shall be as under: a. Foreign investment shall be allowed in such companies up to 49% with a separate Foreign Direct Investment (FDI) cap of 26% and Foreign Institutional Investment (FII) cap of 23%; b. FDI shall be allowed with specific prior approval of FIPB; c. FII shall be allowed only through purchases in the secondary market; d. FII shall not seek and will not get representation on the Board of Directors; e. No foreign investor, including persons acting in concert, will hold more than 5% of the equity in these companies. ii. The aforesaid limits for foreign investment in respect of recognised Stock Exchanges shall be subject to 5% shareholding limit as prescribed under the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006. 4.8 Designated e-mail ID for regulatory communication with SEBI Reference Circular MIRSD/DPS- III/Cir-23/08 dated July 25, 2008 Depositories shall create a designated e-mail id for regulatory communication and inform it to SEBI. This e-mail id sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is decided that the limitation period for filing an arbitration reference shall be governed by the law of limitation, i.e., The Limitation Act, 1963. The modified limitation period shall also be applicable to cover inter alia the following cases: a. where the limitation period (in terms of Limitation Act 1963) have not yet elapsed and the parties have not filed for arbitration with the depository, OR b. where the arbitration application was filed but was rejected solely on the ground of delay in filing within the earlier limitation period; and the limitation period (in terms of Limitation Act 1963) have not yet elapsed. 4.12 Disclosure of investor complaints and arbitration details on Depository website Reference Circular SEBI/MRD/ OIAE/ Dep/ Cir- 4/2010 dated January 29, 2010 Depositories shall disclose the details of complaints lodged by Beneficiary Owners (BO s)/ investors against Depository Participants (DPs) in their website. The aforesaid disclosure shall also include details pertaining to arbitration and penal action against the DPs. The format for the reports for the aforesaid disclosure consists of the following reports: i. Report 1A: Complaints re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for Redressal with Arbitrators 1 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N Total *including against its authorized persons, employees, etc. ** Non actionable means the complaint that are incomplete / outside the scope of Depository (Arrange the DPs in descending number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edressal at the end of period Filed by DP Filed by BO Pending For more than 6 months For more than 3 months, but less than 6 months 1 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (DPs) during 2008-09: Updated on mmm dd yyyy (to be updated every quarter) (in excel sheet) Sl. No. Name of DP Registration No. No. of Complaints received Action against DP, its authorized person and employees together No. of Penal Orders issued Monetary Penalties levied (Rs. lakh) No. of Arbitration Awards issued against DP For complaints For others For complaints For others 1 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report 3B: Penal Actions against Depository Participants (DPs) during 2009-10: Updated on mmm dd yyyy (to be updated every quarter) (in excel sheet) Sl. No. Name of DP Registration No. No. of Complaints received Action against DP, its authorized person and employees together No. of Penal Orders issued Monetary Penalties levied (Rs. lakh) No. of Arbitration Awards issued against DP For complaints For others For complaints For others 1 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N Report 4A: Redressal of Complaints lodged by investors against Listed Companies during 2008 -09: Updated on mmm dd yyyy (to be updated every quarter) (In excel format) Sl. No. Name of the Company No. of Complaints Received Redressed through Depository Non-Actionable* Pending for Redressal with Depository 1 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mat) Sl. No. Name of the Company No. of Complaints Received Redressed through Depository Non-Actionable* Pending for Redressal with Depository 1 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g II b Delay in Rematerialisation request processing II c Delay in/ Non-Receipt of Original certificate after demat rejection II d Non Acceptance of demat/remat request Type III Transaction Statement Related III a Delay in/ Non-Receipt of Statements from DP III b Discrepancy in Transaction statement Type IV Improper Service Related IV a Insistence on Power of Attorney in its favour IV b Deactivation/ Freezing/ Suspension related IV c Defreezing related IV d Transmission Related IV e Pledge Related IV f SMS Related IV g Non-u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV Referred to Arbitration V Forwarded to Company/RTA for appropriate action. 4.13 Disclosure of regulatory orders and arbitration awards on Depository website Reference Circular SEBI/MRD/ DP/ 19/2010 dated June 10, 2010 Depositories shall post all their regulatory orders and arbitration awards issued since April 1, 2007. Further, all regulatory orders and arbitration awards as and when issued shall be posted on their website immediately. 4.14 Establishment of connectivity by Clearing House / Clearing Corporation (CH/CC) with the Depository Clarification Reference: MRD/DoP/ Dep/82334 /2006 dated December 14, 2006 i. On examination of the provisions of Regulations 19(a) and 31 of the SEBI (Depositories and Participants) Regulations, 1996, it is advised that registration of a CC/CH of a stock exchange as a DP with SEBI is not mandatory and a pre-requisite for it to obtain connectivity with the depositories. However, if the CC/CH of a stock exchange desires to function as any other Depository Participant , i.e. to open BO accounts for investors or clearing member acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose that the concerned RGESS eligible Exchange Traded Funds and Mutual Fund schemes is in compliance with the provisions of RGESS guidelines notified by Ministry of Finance vide notification no. 51/2012 F. No. 142/35/2012-TPL dated November 23, 2012, in Scheme Information Document (SID), in case of new fund offer, or by way of addendum, in case of existing RGESS eligible Exchange Traded Funds and Mutual Fund schemes. c. Section 6(c) of the notification states that the eligible securities brought into the demat account will automatically be subject to lock-in during the first year, unless the new investor specifies otherwise and for such specifications, the new retail investors shall submit a declaration in Form B indicating that such securities are not to be included within the above limit of investment. It is clarified that such declaration shall besubmitted by an investor to its Depository Participant within a period of one month from the date of transaction. d. For transactions undertaken by investors through their RGESS designated demat account, Depositories may seek necessary transactional details from stock exchanges viz. Actual Trade value, Trading date, Settlement num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Conversion of Partly Paid up Involuntary 9 Dividend [Final/ Interim/ Special] Involuntary 10 Exchange of Share Certificate [Name change] Involuntary 11 Rights Issue Voluntary 12 Conversion (compulsory)* Involuntary 13 Conversion (optionally)* Involuntary 14 Redemption Involuntary (voluntary, if there is option to continue with revised terms) 15 Dividend on Mutual Fund Involuntary 16 Redemption of Mutual Fund Involuntary on maturity (voluntary, if there is option to shift between different scheme(s) or on account of exit option due to change in fundamental attributes of scheme) * Considering any conversion into equities (e.g.: Conversion of warr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding clearing, settlement and recording of monetary and other financial transactions. The principles are international standards set forth to a. Enhance safety and efficiency in payment, clearing, settlement, and recording arrangements, b. Reduce systemic risk. c. Foster transparency and financial stability and d. Promote protection of participants and investors. v. Financial Market Infrastructure (FMI) are critically important institutions responsible for providing clearing, settlement and recording of monetary and other financial transactions. The different categories of FMIs, as identified under PFMIs, are listed below - Payment Systems (PSS) A payment system is a set of instruments, procedures, and rules for the transfer of funds between or among participants. The system includes the participants and the entity operating the arrangement. Payment systems are typically based on an agreement between or among participants and the operator of the arrangement, and the transfer of funds is effected using an agreed-upon operational infrastructure. Central Securities Depositories (CSD) Central securities depository provides securities accounts, central saf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grown in importance, particularly in the OTC derivatives market. By centralising the collection, storage, and dissemination of data, a well designed TR that operates with effective risk controls can serve an important role in enhancing the transparency of transaction information to relevant authorities and the public, promoting financial stability, and supporting the detection and prevention of market abuse. An important function of a TR is to provide information that supports risk reduction, operational efficiency and effectiveness, and cost savings for both individual entities and the market as a whole. Such entities may include the principals to a trade, their agents, CCPs, and other service providers offering complementary services, including central settlement of payment obligations, electronic novation and affirmation, portfolio compression and reconciliation, and collateral. Adoption of Principles of Financial Market Infrastructures vi. All CPSS and IOSCO members are required to strive to adopt the PFMIs and implement them in their respective jurisdictions. vii. SEBI as a member of IOSCO is committed to the adoption and implementation of the new CPSS-IOSCO standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional financial resources sufficient to cover a wide range of potential stress scenarios that should include, but not be limited to, the default of the participant and its affiliates that would potentially cause the largest aggregate credit exposure to the CCP in extreme but plausible market conditions. Principle 5: Collateral An FMI that requires collateral to manage its or its participants credit exposure should accept collateral with low credit, liquidity, and market risks. An FMI should also set and enforce appropriately conservative haircuts and concentration limits. Principle 6: Margin A CCP should cover its credit exposures to its participants for all products through an effective margin system that is risk-based and regularly reviewed. Principle 7: Liquidity risk An FMI should effectively measure, monitor, and manage its liquidity risk. An FMI should maintain sufficient liquid resources in all relevant currencies to effect same- day and, where appropriate, intraday and multiday settlement of payment obligations with a high degree of confidence under a wide range of potential stress scenarios that should include, but not be limited to, the default of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FMI should identify, monitor, and manage its general business risk and hold sufficient liquid net assets funded by equity to cover potential general business losses so that it can continue operations and services as a going concern if those losses materialise. Further, liquid net assets should at all times be sufficient to ensure a recovery or orderly wind-down of critical operations and services. Principle 16: Custody and investment risks An FMI should safeguard its own and its participants assets and minimise the risk of loss on and delay in access to these assets. An FMI s investments should be in instruments with minimal credit, market, and liquidity risks. Principle 17: Operational risk An FMI should identify the plausible sources of operational risk, both internal and external, and mitigate their impact through the use of appropriate systems, policies, procedures, and controls. Systems should be designed to ensure a high degree of security and operational reliability and should have adequate, scalable capacity. Business continuity management should aim for timely recovery of operations and fulfillment of the FMI s obligations, including in the event of a wide-sca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it report along with comments of depositories should be communicated to SEBI. Further, along with the audit report, depositories are advised to submit a declaration from the MD / CEO certifying the security and integrity of their IT Systems. Annexure System Audit Framework Audit Process Following steps would be repeated annually to ensure that the process is comprehensive effective: 1. The Audit shall be conducted according to the Norms, Terms of References (TOR) and Guidelines issued by SEBI. 2. Stock Exchange / Depository (Auditee) may negotiate and the board of the Stock Exchange / Depository shall appoint the Auditors based on the prescribed Auditor Selection Norms and TOR. The Auditors can perform a maximum of 3 successive audits. The proposal from Auditor must be submitted to SEBI for records. 3. Audit schedule shall be submitted to SEBI at-least 2 months in advance, along with scope of current audit previous audit. 4. The scope of the Audit may be extended by SEBI, considering the changes which have taken place during last year or post previous audit report 5. Audit has to be conducted and the Audit report be submitted to the Auditee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last three years in any consulting engagement with any departments / units of the entity being audited. The Auditor may not have any cases pending against its previous auditees, which fall under SEBI's jurisdiction, which point to its incompetence and/or unsuitability to perform the audit task. Terms of Reference (ToR) 1. General Controls for Data Center Facilities - It must include Application access - Segregation of duties, Database Application access etc. Maintenance access - Vendor engineers. Physical access - Permissions, logging, exception reporting alerts. Environmental controls - Fire protection, AC monitoring etc. Fault resolution mechanism. Folder sharing and Back-up controls - Safeguard critical information on local desktops Incidences of violations in last year corrective actions taken 2. Software Change Control - It must include User awareness Processing of new feature request Fault reporting / tracking mechanism process for resolutions Testing of New releases / Bug-fixes - Testing process (automation level) Version Control - History, Change Management process etc. Development / T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Asset Management - It must include Utilization monitoring - including report of prior year utilization Capacity planning - including projection of business volumes IT (S/W, H/W N/W) Assets, Licenses maintenance contracts Insurance Disposal - Equipment, Media, etc. 11. Entity Specific Software 12. Any other Item Electronic Waste Disposal Based upon previous Audit report as well as any other specific information given by SEBI Audit Report Guidelines The Audit report should have explicit coverage of each Major Area mentioned in the TOR, indicating any Nonconformity (NCs) or Observations (or lack of it). For each section - auditors should also provide qualitative input about ways to improve the process, based upon the best practices observed. The report should also include tabulated data to show NCs / Observations for each Major Area in TOR. Fully detailed report should be submitted, along with an Executive Summary in tabulated form including following information: Issue Log Column Heading Description Responsibility Major Area Major area/releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in place Business Continuity Plan (BCP) and Disaster Recovery Site (DRS) so as to maintain data and transaction integrity. ii. Apart from DRS, stock exchanges should have a Near Site (NS) to ensure zero data loss whereas, the depositories should also ensure zero data loss by adopting a suitable mechanism. iii. The DRS should be set up sufficiently away, i.e. in a different seismic zone, from Primary Data Centre (PDC) to ensure that both DRS and PDC are not affected by the same disasters. iv. The manpower deployed at DRS / NS should have similar expertise as available at PDC in terms of knowledge / awareness of various technological and procedural systems and processes relating to all operations such that DRS / NS can function at short notice, independently. v. Configuration of DRS / NS with PDC a) Hardware, system software, application environment, network and security devices and associated application environments of DRS / NS and PDC should have one to one correspondence between them. b) Exchanges / Depositories should have Recovery Time Objective (RTO) and Recovery Point Objective (RPO) not more than 4 hours and 30 minutes, respectively. c) Solution archite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Houses or Clearing Corporations of Stock Exchanges should also demonstrate their preparedness to handle any issue which may arise due to trading halts in stock exchanges and / or failure or stoppages at other Stock Exchanges / Depositories / Clearing Corporations d) The policy document and subsequent changes / additions / deletions should be approved by Governing Board of the Stock Exchange / Depositories and thereafter communicated to SEBI. viii. Considering the above, stock exchanges and depositories are advised to submit their BCP - DR policy to SEBI within 3 months from the date of this circular. Further, they should also ensure that point 1 (vi) (f) mentioned above is also included in scope of system audit as mentioned in the circular no. CIR/MRD/DMS/13/2011 dated November 29, 2011. ix. These guidelines will be applicable to depositories, stock exchanges having nation-wide terminals and stock exchanges having trading on their own platforms. Further stock exchanges, currently having no trading on their own platforms, will be required to comply with these guidelines before recommencement of trading on their own platforms in terms of Circular No. MRD/DSA/SE/Cir-12/09 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a comprehensive review of the depository system of Indian Securities market. ii. As a first measure, DSRC has reviewed framework adopted by the depositories with regard to the inspection of depository participants (DPs). Considering the recommendations of the committee, it has been decided that depositories shall ensure the following while inspecting their DPs. Inspection Areas and Sample Size iii. For conducting inspection of DPs, depositories shall inspect the areas as mentioned in Annexure - I. During inspection, depositories shall cover implementation of circulars / guidelines issued by SEBI and guidelines / operating instructions / directions by depositories in respect of these areas. In addition, Depositories may include such other areas as felt appropriate. iv. For the purpose of determining the size of sample, depositories shall be guided by 'Adaptive Sample Size determination methodology' as mentioned at Annexure - II. Categorization / Risk Rating of DPs v. For the purpose of computing total risk score of DPs, depositories shall be guided by DP Rating Model / Categorization as mentioned at Annexure III. vi. Depositories should periodica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / categorization of common DPs with each other. For the purpose of determining sample size and frequency of the joint inspection of such common DPs, the higher risk categorization assigned by any of the Depository shall prevail. Annexure I List of Inspection Areas 1. Depositories shall inspect the areas mentioned at para 2 below during inspection of DPs with regards to any 1.1. Circulars / Guidelines issued by SEBI on the areas mentioned below. 1.2. Guidelines / Operating Instructions / Directions from depositories on the areas mentioned below. 2. In case there are built in system checks at the depository that ensure compliance of any of the inspection areas / sub areas with regard to point 1.1 and 1.2 above, the depository may decide on the including the same during the inspection of DPs Inspection Areas A. Account Opening / KYC Documents A.1. Account Opening forms A.2. KYC Documents A.2.1. PAN Verification A.2.2. In-person verification A.2.3. Forwarding of Documents to KYC Registration Agency (KRA) A.3. Proof of Identity (POI) A.4. Proof of Address A.5. Correspondence Address A.6. Authorized Signatories A.7. Complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering Act, 2002 (PMLA) H.1. Compliance with PMLA Act, 2002 and SEBI Guidelines on areas such as Customer due diligence, suspicious transaction monitoring , reporting and record keeping H.2. Appointment of Principal officer as required under PMLA Act,2002 H.3. Mechanism to deal with alerts provided by Depository H.4. Suspicious Transactions reports to FIU H.5. Any other area as may be specified by the depository I. Maintenance of record and documents I.1. Information regarding place(s) of record keeping I.2. Outsourcing of record keeping activities I.3. Any other area as may be specified by the depository J. Service Centre Opening and closing/ modification of service centers J.1. Procedure for Opening /Closure of Service centers J.2. Details of Service centre on Depository website J.3. Qualified persons at service centers J.4. Any other area as may be specified by the depository K. Information Technology areas K.1. Hardware, Software and Network requirements / configurations K.2. Logical and Physical restrictions / safeguards K.3. IT Security K.4. Procedure for alteration of parameters / configurations K.5. Redunda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for account opening shall cover all categories of clients such as individuals, HUF, Corporate, FIIs etc. Base sample size : 5% of Account Opening Forms (AOFs) or 150 AOFs whichever is higher, with a maximum cap of 1000 accounts. Final Sample Size : The final sample size shall also be dependent on past rating / categorization of DP. The following multipliers shall be used to determine the final sample size for the current inspection. In case the total number of instances / cases is less than the final sample size, then 100% of the samples shall be verified. DP Rating / Categorization Multiplier High risk 3 Medium High risk 2 Medium risk 1.5 Low risk 1 The selected sample shall maintain the proportion of new accounts opened in each category, except for Account Opening Forms (AOF) relating to FIIs where it shall be checked on a 100% basis. 2. Sample Size for inspection area relating to DIS Base sample size: 10% of total DIS processed or 200 processed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be verified. DP Rating/ Categorisation Multiplier High risk 3 Medium High risk 2 Medium risk 1.5 Low risk 1 A uniform Base sample size of 100 shall be adopted in case of all other activities. In case the total number of samples is less than 100, then 100% of the samples shall be verified. Annexure-III DP Rating / Categorization Model I. Quantitative Score Calculation : Specific weights shall be assigned to each area as decided by each depository. The Total Quantitative Score shall be the summation of all individual inspection scores. Table: Indicative Table for calculation of Quantitative Score Sr No Inspection Areas Weight (A) B = No of Instances divided by Sample size Inspection Score IS = A*B A. Inspection Area 1 A.1. Inspection Sub Area A 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Regulatory / procedural Compliance 4 Automation of systems and processes for critical activities 5 Quality of Management 6 Financial Status / profitability of DPs 7 Pending enquires / Penalties imposed by SEBI / Depositories on DP operations 8 Complaints redressal 9 Adverse findings of other activities (eg. Broking / custodian / banks etc) Total Qualitative Score = (Area Scores) Following indicative factors shall be taken into account for arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation as well as the intermediaries cannot have voting rights in respect of securities held in the pool account. 4.24 Risk Management Policy at the Depositories Reference: CIR/MRD/DP/1/2015 dated January 12, 2015 i. The depositories are advised to establish a clear, comprehensive and well documented risk management framework which shall include the following: a) an integrated and comprehensive view of risks to the depository including those emanating from participants, participants' clients and third parties to whom activities are outsourced etc.; b) list out all relevant risks, including technological, legal, operational, custody and general business risks and the ways and means to address the same; c) the systems, policies and procedures to identify, assess, monitor and manage the risks that arise in or are borne by the depository ; d) the depository's risk-tolerance policy; e) responsibilities and accountability for risk decisions and decision making process in crises and emergencies. ii. The Depositories shall put in place mechanism to implement the Risk Management Framework through a Risk Management Group/Committee which shall be head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 29. MRD/DoP/Cir- 5/2007 dated April 27, 2007. 30. MIRSD/DPS-III/Cir-9/07 dated July 3, 2007. 31. MIRSD/DPS- III/Cir-23/08 dated July 25, 2008. 32. SEBI/MRD/Dep/Cir-03/2008 dated February 28, 2008. 33. MRD/DoP/Cir-20/2008 dated June 30, 2008. 34. MRD/DoP/SE/Dep/Cir-2/2009 dated February 10, 2009. 35. CIR/MRD/DP/19/2010 dated June 10, 2010. 36. CIR/MRD/DP/20/2010 dated July 1, 2010. 37. CIR/MRD/DP/22/2010 dated July 29, 2010. 38. CIR/MRD/DO/37/2010 dated December 14, 2010. 39. CIR/MRD/DP/04/2011 dated April 07, 2011. 40. CIR/MRD/DP/05/2011 dated April 27, 2011. 41. MIRSD/SE/Cir-21/2011 dated October 5, 2011. 42. CIR/MRD/DMS/13/2011 dated November 29, 2011. 43. CIR/MRD/DMS/12/2012 dated April 13, 2012 44. CIR/MRD/ DMS/17/2012 dated June 22, 2012 45. CIR/MRD/ICC/16/2012 dated June 15, 2012. 46. CIR/MRD/DP/21/2012 dated August 02, 2012. 47. CIR/MIRSD/09/2012 dated August 13, 2012. 48. CIR/MRD/DP/22/2012 dated August 27, 2012. 49. CIR/MRD/DP/24/2012 dated September 11, 2012. 50. CIR/MRD/DP/DA/25/2012 dated September 21, 2012. 51. CIR/MRD/DP/27/2012 dated November 01, 2012. 52. CIR/MRD/DP/32/2012 dated December 06, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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