Internal Control Policy - Depository Operation


benefit_bullet Depository Operation:

  1. Under Depository Operations, all activities viz; opening of Demat account, dematerialization of shares, transfer of shares from one demat account to another, etc are covered.
  2. The depository activities are governed by the Rules, Regulation and Bye-laws of NSDL, who in turn is governed by SEBI.
  3. All the activities of our Depository Operation have to be monitored and reviewed on a regular basis.
  4. A procedure manual has been prepared for the DP operation wherein all the activities of each Officers and Executives of the Head Office as well as the Branch Offices have been demarcated, department-wise very clearly and specifically. This manual has to be strictly followed by one and all.
  5. Besides the Manuals, each one has to keep oneself updated on the Rules, Regulations, Bye-laws and notices received from NSDL/SEBI with regards to the day to-day operations of the depository activity so that the same is conducted in a smooth manner.
  6. Compliance of the Rules, Regulations, Bye-laws and notices of NSDL/SEBI is of utmost importance. Non-compliance of the above amounts to violation of the laws and penalty will be imposed by NSDL.

benefit_bullet Opening of Demat Account:

  1. The process of opening a Demat account is begun by filling in the “Know Your Client” (KYC) forms as per the prescribed format, and registering the KYC details of the client with the KYC Registration Agency (KRA). Fulfillment of KYC details is of utmost importance. Hence, due care is to be taken for the same.
  2. In case the KYC of the client is already registered, the same has to be verified with the concerned KRA. If not, the client has to fulfill the KYC requirement by filling-in their name and address (permanent address and address for communication), income details and affixing their latest passport size color photograph. This form is to be submitted along with the photocopies of self-attested PAN card and proof of address, after due verification and in-person verification of the client.
  3. Towards Proof of Address, the client has to submit a photocopy of any one of either a valid Driving License, valid Passport, Voter’s ID Card, latest Bank Passbook/Statement, latest landline Telephone bill in the name of the client, latest Electricity bill in the name of the client, etc.
  4. All the holders of the account have to be present personally for conducting the In-person verification. In case, the client is not able to visit personally, the DP’s Executive visit will the clients’ place for the same.
  5. Conducting In-person verification is also an important procedure. This procedure has to be done by the own staff only. No outside person can conduct the said procedure.
  6. Thereafter, the PAN card of the applicant is to be verified on the website of NSDL as per the procedure prescribed.
  7. Besides the KYC the client has to fill up an application form for opening a Demat account wherein they have to fill-in their bank details, details of occupation, approximate annual income, etc., along with the details of Nomination, if required at the place provided for the same.
  8. The client also has to sign and execute the Right and obligation of Beneficial owner and Depository participant prescribed by SEBI and Depositories as well as the Risk Disclosure Document, as per the guidelines prescribed by the NSDL/SEBI.
  9. The Depository receives the above documents and verifies the supporting documents with the originals and affix a rubber stamp for ‘Original Documents Verified’. Only then can the applications be accepted.
  10. Only after completing the above procedures, the application form is to be sent for processing and opening the account.
  11. Applications for Demat account are to be received at various locations where our branch offices are located. However, in order to ensure full and complete compliance of all the rule and regulations prescribed by SEBI / NSDL, the processing of the applications is to be done at the Head Office only.
  12. On receiving the above, the documents are then to be sent to the back office for further processing. Here the documents are to be once again verified to ensure full and complete compliance with regards to the KYC norms.
  13. The financial details of the clients are also to be verified in accordance with the PMLA act, as per the requirement of SEBI.
  14. Thereafter, the client details, as mentioned in the KYC form is to be entered strictly in the DPM software only. All data entry has to be undertaken with utmost care and to ensure minimum error, preferably errorless.
  15. The signature of the holder(s) is to be scanned and stored in a soft copy for future references. Any documents, applications or instructions from the client thereafter will be accepted only if the signature on such document tallies with the one available in our records, which will be available, as mentioned above.
  16. After the data is entered, the same is to be once again verified with the KYC forms and this data is to be uploaded to NSDL for activating the same.
  17. Once the above procedure is complete and the status of the account is ‘Active’ only then the welcome kit containing the Client Master Report, initial set of Delivery Instruction Slip Book (DIS) and photocopies of the Right and obligation of Beneficial owner and Depository participant prescribed by SEBI and Depositories and Schedule of Charges, is to be provided to the concerned. It should be ensured that the Client Master is not given before the account status is active.
  18. The initial set of DIS should be containing five slips and one spare requisition slip for acquiring additional DIS.
  19. The welcome kit has to be sent to the client’s address, as mentioned in the KYC, by Registered Post or Courier.
  20. Demat account for HUF should be in the name of the Karta with the basic requirements as mentioned above. There cannot be any joint holders or nominee in HUF account.
  21. Minors can also open a Demat account with a Guardian. However, there cannot be any joint holders or a nominee in the same. Guardian will sign the documents on behalf of the minor account holder.
  22. For corporates and trusts, the supporting documents for the authorized signatories should also be collected in addition to the documents for the corporate/trust.
  23. Partnership firms cannot open a demat account. However, the Partners can open their account under individual status with the PAN and Bank details of the partnership firm.
  24. SEBI has introduced a Basic Service Demat Account (BSDA) with limited services and facilities for encouraging holding of Demat account by retail individual investors and to reduce the cost of maintaining securities in such account. Under the guidelines prescribed therein, a BSDA Demat account shall be made available to new as well as existing investors for holding securities upto a maximum value of Rs.2 lacs. However, if at any time the holding value of such account exceeds the above mentioned limit, the BSDA facility will cease to apply and the account will be considered under normal category and all charges shall be applicable accordingly. An investor can open only one BSDA across all DPs.

benefit_bullet Changes In Client Master Details:

  1. The clients may approach for certain changes in the Client Master Report of their Demat account. These changes are also to be undertaken in accordance to the Rules and Regulations as prescribed by NSDL.
  2. Any change in the Client Master has to be done provided the application is received in the format prescribed by NSDL. These formats are made available at all our offices. Alternately, the same can also be downloaded from our website Such changes are to be done in the DPM software only.
  3. For change in address of the holder, the client has to submit an application form for updating the KYC. The application form is to be duly filled with the new address, signed by the holder and has to be personally submitted by the holder along with supporting documents viz; Proof of Photo Identity and Proof of New Address in the name of the holder.
  4. On receipt of such an application, the receiving officer should verify the supporting documents with the originals and affix the rubber stamp of ‘Original Document Verified’ on each document and also verify the signature of all the holders. Only if the above details are found to be in accordance to the requirement, the application should be accepted and sent to the back-office for processing.
  5. Once the application is processed, a fresh print of the Client Master Report having the new address has to be taken and one copy of the same is to be sent to the client’s new address for confirmation and another copy to their old address for intimation of change of address.
  6. Similarly, for change of bank details also the prescribed format is available. In this form, under the change of bank details, the client has to fill in the old as well as the new bank details, attach a photocopy or an original of the cheque leaf of the new bank account along with a copy of the last transaction statement and submit the same.
  7. The receiving officer has to verify the details and signature of the client and if found to be okay, the application can be accepted and sent to back-office for processing.
  8. Once the application for change in bank details is processed, a fresh Client Master Report having the clients new bank details, has to be sent.
  9. No changes can be done in the name of the holders, except as prescribed by SEBI nor there can be any addition or deletion in the same.
  10. The details of a Nominee can be added, deleted or modified according to the preference of the client, which can be done by submitting an application in the prescribed format.

benefit_bullet Delivery Instruction Slip:

  1. Delivery Instruction Slip (DIS) is the slip used for transferring shares from one Demat account to another under Off-market Transfers or to the Broker’s pool account under Market Trades.
  2. On opening a Demat account, one booklet containing a set of five DIS and one requisition slip is to be provided to the client in the welcome kit. Thereafter, for any additional requirement the client can get the DIS on submission of a requisition for the same.
  3. The Demat Help-desk will issue additional set of DIS book only on receipt of the Requisition slip. Without the requisition slip, no DIS will be issued.
  4. The DIS issued is to be pre-numbered with distinctive serial number and pre-printed/pre-stamped with client ID along with the client’s name. It should also contain a spare requisition slip, which also should be stamped with the client ID, for future requirement of additional DIS by the client.
  5. If the client personally visits the office for their requirement of additional DIS, the same should be issued and hand delivered to the client at that moment itself after verifying the requisition slip submitted by them. The procedure for issue of additional DIS to a client or to their representative is to be strictly followed. Additionally, the identity of the receiver is to be verified and the name & address to be written down manually in a register. The signature of the receiver is also to be obtained.
  6. Loose DIS is not to be issued to any client.
  7. Blank DISs are to be kept in a safe custody in the office premises and the same should be accounted for. The balance DIS which are blank should be verified at the end of each day.
  8. The Front-desk will be accepting the duly filled and signed DIS from the client for necessary execution of the clients’ instruction. The filled DIS should contain the details of the account to which the scrip is to be transferred, ISIN number & name of the scrip and quantity in words & figures. If the scrip is to be transferred to another Demat account, the details of such account should be mentioned under the column for Off-market Transaction and if the scrip is to be transferred on account of sale, the same should be mentioned under the column for Market Trades.
  9. Market Trades and Off-market transactions cannot be mentioned in the same DIS. Both should be submitted separately.
  10. For Off-market transfers, the reason for transfer and consideration should also be mentioned in the DIS along with payment details.
  11. The signature of the holder should be the same as in our records, which the client has given at the time of opening the Demat account. Initials or short sign will not be accepted.
  12. At the time of accepting such DISs, the officer at the desk has to first verify for any outstanding of the client. If so, the same has to be cleared first before accepting any instruction from the client. In case there is no outstanding or the outstanding is cleared by the client, the officer at the front-desk can accept the DIS by entering the data in the back-office system and charge the client accordingly for processing and execution of the same. All the charges to be recovered from the clients are to be verified from time-to-time with the Departmental Head for any changes in the same.
  13. The DIS has to be accepted only if the same is submitted in original personally by the concerned client or their representative. Any DIS received from the client through fax or in photocopy or in any other form other than the original slip is not to be accepted.
  14. Besides, in case the demat account is Dormant, then the procedure for re-activating a dormant account should be followed by contacting the concerned client in order to verify the details of DIS. A register for Dormant Account is to be maintained, wherein the details of the DIS as well as the details of the person contacted for the same is to be mentioned.
  15. At the time of entering the data of the DIS in the system, the officer doing so shall have to verify that on entering the pre-printed serial number given on the DIS, the system automatically shows the details of the same client who is submitting the said DIS and not of any other client.
  16. Further, while accepting the DIS, the same has to be affixed with a rubber stamp of date and time of receiving the DIS and the receiving officer has to sign the same after mentioning the date and time of receipt of the DIS. A duplicate copy of the DIS is to be given back to the client for their records.
  17. In case, there is any correction or over-writing in the DIS, the same has to be authenticated by all the holders by affixing their signatures as available in our records.
  18. The entered DIS is then to be forwarded to the verification department where the instruction of the client submitted through the DIS and entered in the back-office software is to be verified for its authenticity. The signature of the holder(s) is also to be verified and if the above is found to be correct, only then the instruction has to be released for execution.
  19. If the total value of shares in listed in the DIS amounts to Rs.5 lacs and more, then dual verification needs to be done. Similarly, for off-market DIS also if the number of scrips are more than 5 then such DIS should be released only after dual verification.
  20. The procedure for collecting DIS for all branch office will remain the same as mentioned above. However, processing and execution of the same will be done by authorized personnel at the Head Office only. The DISs collected at the branch offices, are to be entered and then sent to the HO on a daily basis for its processing and execution.
  21. As per the guidelines prescribed by NSDL, the affixing of the rubber stamp at the time of accepting the DIS should be in accordance to the deadline limit for execution of such instruction. In case the DIS submitted is for Off-market, the same has to be stamped with ‘Received at Client Risk’ and such instruction has to be executed on a best effort basis. Whereas, the DIS for Market transaction can be received upto 4:00 p.m. on the day prior to the pay-in day. If the same is submitted by the client after the above mentioned time, the same can also be accepted, but at clients’ risk by affixing the rubber stamp ‘Received at Client Risk’ which also has to be executed on a best effort basis.
  22. In case the DIS is submitted for Off-market transaction the number of scrip is more than five, the client has to be contacted and the details verified before executing the DIS for such bulk transfer.
  23. Executed DIS required to be scanned, digitally signed and uploaded on next business day on NSDL-DIVS system.

benefit_bullet Dematerialization of Shares & Securities:

  1. For dematerialization of shares and securities, a list of such securities approved by NSDL and available for Demat is to be kept available at the help-desk of the HO as well as at all the branch offices.
  2. Upon receipt of application for dematerialization of shares, the receiving officer should verify the same and immediately deface the share certificate by affixing a rubber stamp of ‘Surrendered for Demat’ and the DRF along with the share certificate should be kept in a safe custody till the time they are processed and sent to the Registrar & Transfer Agent (R&T).
  3. The DRFs should be processed and sent to the R&T Agent within seven working days from the date of receipt. The address of the R&T agent should be properly verified from the records before sending the DRFs.
  4. In case of rejection of DRF, the same should be immediately informed to the concerned client accordingly.

benefit_bullet Monitoring of Branches:

  1. The activities of all our branch offices are to be monitored on a regular basis.
  2. All activities are centralized and processing of the same is to be done at the Head Office only. The branches will merely act as a collection center only.
  3. It is to be ensured that the branches also follow all the rules and regulations issued by NSDL/SEBI from time to time and copies of such circulars intimating any change in the rules and regulations are to be sent to each branch offices.
  4. All the branch offices have to strictly adhere to the various norms issued by the NSDL/SEBI.
  5. Regular inspection of the branch is to be carried out.
  6. Besides, regular interaction of the branch with the head office also helps in various types of trouble shooting.

benefit_bullet Compliance Requirements:

  1. The Depository activity of NSDL is being conducted within the prescribed Rules, Regulations and Bye-laws of NSDL.
  2. All compliance requirements are to be fulfilled.
  3. A Principal Officer and a Compliance Officer has been designated for taking care of the operational as well as compliance requirement.
  4. Each day, the concerned designated person has to checks for new circulars and notices being released by NSDL.
  5. All the circulars and notices, as well as various other intimations received from the NSDL through Microsoft Exchange as well as on their website are to be read carefully and understood by the designated person.
  6. Details of all such circulars and notices to be circulated and explained to all the concerned staff members of each department in order to ensure full and complete compliance from the grass root level.