SIVA SIVANI INSTITUTE OF MANAGEMENT “IIP- 2012- SECOND PROJECT REPORT” COMPANY: “RELIANCE SECURITIES LIMITED” PROFILE: CAPITAL INVESTMENT MARKET BY P. REWANTH KUMAR 2B2-36- BIFAAS * INTRODUCTION TO DEMAT ACCOUNT: * EVOLUTION OF DEMAT ACCOUNT: The term “demat”, in India, refers to a dematerialised account for individual Indian citizens to trade in listed stocks or debentures in electronic form rather than paper, as required for investors by the Securities and Exchange Board of India (SEBI). In a demat account, shares and securities are held electronically instead of the investor taking physical possession of certificates.
A demat account is opened by the investor while registering with an investment broker (or sub-broker). The demat account number is quoted for all transactions to enable electronic settlements of trades to take place. Access to the demat account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the demat account are automatically made once transactions are confirmed and completed. Demat accounts are very popular in India. Demat account is the short form of Dematerialised Account.
In fact according to SEBI, Demat accounts are now compulsory. Previously during the time of Harshad Mehta (1992), the shares were trading in physical forms. And this was the reason why some fraudsters were taking the advantage of this opportunity to print fake shares and selling it to public. But after Harshad Mehta Scam, SEBI has decided to transact shares only in Dematerialised form (Electronic form) so that every transaction can be monitored and these types of scams can be avoided. Demat account which refers to a dematerialised account. The Demat account is there for individual Indian citizens to trade in listed stocks or ebentures the Securities Exchange Board of India (SEBI) requires the investor to maintain a Demat account. A Demat Account is opened by the investor while registering with an investment broker (or sub broker). The Demat account number which is quoted for all transactions to enable electronic settlements of trades to take place. Let’s get to know everything that is there to know about the Demat account. * Is Demat account a Must? Yes, according to SEBI, Demat accounts are now Must in India. Every Investor Must have a Demat account to transact in the Securities.
However, according to SEBI, it has allowed trades up to 500 shares to be settled in physical form. But still nobody prefers Physical shares anymore in India. Everybody is preferring Demat accounts Now a days………!!!!!!!! * ————————————————- Advantages of demat: A demat account also helps avoid problems typically associated with physical share certificates, for example: delivery failures caused by signature mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks associated with forgery and due to damaged stock certificates.
Demat account holders also avoid stamp duty (as against 0. 5 per cent payable on physical shares) and filling up of transfer deeds. Demat account holders usually obtain quicker receipts of benefits like stock splits and bonuses. The other advantage is the ability access stocks, bonds, ETFs, IPO, Gold ETF, – A safe and convenient way to hold securities; – Immediate transfer of securities; – No stamp duty on transfer of securities; – Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. – Reduction in paperwork involved in transfer of securities; – Reduction in transaction cost; – No odd lot problem, even one share can be sold; – Nomination facility; – Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; – Transmission of securities is done by DP eliminating correspondence with companies; – Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. – Holding investments in equity and debt instruments in a single account. tc. all in one place. Its like one centralized investment account from where you can access and maintain investment products. * Disadvantages of Demat account : There is no as such disadvantage of Demat account. And even if there is any disadvantage of Demat account than by law, In India we Must have to use Demat accounts to do share transactions. ————————————————- * ————————————————- Demat benefits: The benefits of demat are enumerated[by whom? ] as follows: * Easy and convenient way to hold securities * Immediate transfer of securities No stamp duty on transfer of securities * Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated) * Reduced paperwork for transfer of securities * Reduced transaction cost * No “odd lot” problem: even one share can be sold * Change in address recorded with a DP gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately. * Transmission of securities is done by DP, eliminating the need for notifying companies. Automatic credit into demat account for shares arising out of bonus/split, consolidation/merger, etc. * A single demat account can hold investments in both equity and debt instruments. * Traders can work from anywhere (e. g. even from home). * Benefit to the company The depository system helps in reducing the cost of new issues due to lower printing and distribution costs. It increases the efficiency of the registrars and transfer agents and the secretarial department of a company. It provides better facilities for communication and timely service to shareholders and investors. * Benefit to the investor:
The depository system reduces risks involved in holding physical certificates, e. g. , loss, theft, mutilation, forgery, etc. It ensures transfer settlements and reduces delay in registration of shares. It ensures faster communication to investors. It helps avoid bad delivery problems due to signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid on transfer of shares. It provides more acceptability and liquidity of securities. * Benefits to brokers: It reduces risks of delayed settlement. It ensures greater profit due to increase in volume of trading.
It eliminates chances of forgery or bad delivery. It increases overall trading and profitability. It increases confidence in their investors. * Demat options: There are many hundreds of Depository Participants (DPs) offering the Demat account facility in India as of September 2011. A comparison of the fees charged by different DPs is detailed below. There are a few distinct advantages of having a bank as a DP. Having a Demat account with a bank DP, usually provides quick processing, accessibility, convenience, and online transaction capability to the investor.
Generally, banks credit the Demat account with shares in case of purchase, or credit a savings account with the proceeds of a sale, on the third day. Banks are also advantageous because of the number of branches they have. Some banks give the option of opening a demat account in any branch, while others restrict themselves to a select set of branches. Some private banks also provide online access to the demat account. Hence, the investors can conveniently check online details of their holdings, transactions and status of requests through their bank’s net-banking facility.
A broker who acts as a DP may not be able to provide these services. Fees involved There are four major charges usually levied on a demat account: account opening fee, annual maintenance fee, custodian fee and transaction fee. Charges for all fees vary from DP to DP. * Account-opening fee: Depending on the DP, there may or may not be an opening account fee. Private banks, such as HDFC Bank and AXIS Bank, do not have one. However, players such as ICICI Bank, Globe Capital, Karvy Consultants, Bajaj Capital Limited and State Bank of India do impose an opening fee. Most players levy this when re-opening a demat account.
However, the Stock Holding Corporation offers a lifetime account opening fee, which allows the investor to hold on to his/her demat account for a long period. The fee is also refundable. * Annual maintenance fee: This is also known as folio maintenance charges, and is generally levied in advance… * Custodian fee: This fee is charged monthly and depends on the number of securities (i. e. ISINs) held in the account. It generally ranges between Rs 0. 5 to Rs 1 per ISIN per month. DPs will not charge a custody fee for an ISIN on which the companies have paid one-time custody charges to the depository. Transaction fee: The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, which is subject to a minimum amount. The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities, while others charge for both. Some DPs also charge the investor even if the instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs.
In addition to the other fees, the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. This fee varies for both demat (physical-to-electronic) and remat (electronic-to-physical) requests. For demat transactions, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee. For instance, Stock Holding Corporation has charged Rs 25 as the request fee and Rs 3 per certificate as the variable fee. However, SBI has charged only the variable fee, as Rs 3 per certificate.
Remat requests also have charges akin to that of demat. However, variable charges for remat are generally higher than demat. Some of the additional features (usually offered by banks) are as follows. Some DPs offer a frequent-trader account, where they charge frequent traders at lower rates than the standard charges. Demat account holders are generally required to pay the DP an advance fee for each account that will be adjusted against the various service charges. The account holder needs to raise the balance when it falls below a certain amount prescribed by the DP.
However, if the holders also hold a savings account with the DP, they can provide a debit authorisation to the DP for paying this charge. Finally, once choosing a DP, it would be prudent to keep all accounts with that DP, so that tracking of capital gains liability is easier. This is because when calculating capital gains tax, the period of holding will be determined by the DP, and different DPs follow different methods. For instance, ICICI Bank uses the first in first out (FIFO) method to compute the period of holding. The proof of the cost of acquisition will be the contract note.
The computation of capital gains is done account-wise. Indian Banking System First, an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. An investor must have his/her PAN card in original at the time of opening of the account (mandate effective from April 1, 2006). All applicants should carry original documents for verification by an authorized official of the depository participant, under his signature. Further, the investor has to sign an greement with the DP in a depository prescribed standard format, which details rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference. The DP will open the account in the system and give an account number, which is also called BOID (Beneficiary Owner Identification number). The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisation by removing account-opening charges, transaction charges for credit of securities, and custody chargesvide circular dated January 28, 2005.
Further, SEBI has vide circular dated November 9, 2005 advised that with effect from January 9, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of 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. TIPS FOR KEEPING THE DEMAT ACCOUNT SAFE: When the Sensex goes up lakhs of new Demat accounts will be opened by customers. When the Sensex falls down, the increase will stop. Those who opened the Demat accounts stopped paying attention to them. The account holders should keep in mind that this is not a good thing to do. Proper care is to be taken about Demat accounts. Securities and Exchange Board of India – SEBI, National Securities depository Limited – NSDL and central Depository Services Limited – CDSL has imposed many rules on Demat accounts.
There can be people who cheat others so it is better to be careful about Demat accounts. * Demat statement is important to know how many shares are there in the account and what transaction have been done through the account. Depository participant has the responsibility to send the transaction details every week/month to the account holder. Even though there are no transactions, DP has to send the account details. Famous Depository Participants have associate branches in all small towns also. The customer should ask the DP also about the statement instead of depending on he report of the associate branches. If they do not send the statement in time the account holder can make a complaint to the Depository. Demat account holders can also obtain the Demat account details online. Statement can also be obtained by sending email or SMS. To utilize these facilities the account holder should register their name in the DP. The statement should be observed carefully. * After opening the Demat account, the account holder will be given a Demat Instruction Slip-DIS by the Depository Participant. Every slip in this book will have DP code and account number printed on them.
This book has to be kept carefully. These are the proofs for the transactions done through the account. The account holder has to sign on the slip and it will be compared with the signature in the records only after which any transaction will be allowed. If the DIS book falls in the hands of any cheater, the signature may be forged and sell the shares under off market transaction. Many people have faced this experience. Do not every sign on empty slips as these are equal to the blank cheques. * Ask the DP for full Demat Instruction Slip. Do not accept loose slips. Do not leave the column in which the company share details have to be written in the slip. Strike off the empty space. * It is better to fill the details of accounts that are being transferred and other details by the account holder himself. People who do not frequently make transactions through their Demat account can freeze their account. Freezing can be applied to some shares instead of total account. Freezing can also be ordered for either debit or credit through the Demat account. For this the account holder has to fill the details in the Freeze Instruction form and submit the same to the Depository Participant.
The date till which the account is to be freezed can also be indicated. When required De-freeze instructions can be given to activate the account. * ROLE OF NSDL IN TRANSACTING/TRADING THROUGH DEAMT ACCOOUNT: India had a vibrant capital market which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India. This depository promoted by institutions of ational stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialized form in the Indian capital market. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimize risk and reduce costs.
At NSDL, we play a quiet but central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.
National Securities Depository Limited (NSDL), is the first central securities depository in India based in Mumbai. It is promoted by institutions of national stature responsible for the economi development of India and has established a national infrastructure of international standards that handles most of the securities held and settled in dematerialised form in the Indian capital market ————————————————- * ————————————————- NSDL Facts & Figures: As on March 31, 2010 * Number of certificates eliminated (Approx. : 702 Crore * Number of companies in which more than 75% shares are dematted : 2670 * Average number of accounts opened per day since November 1996 : 3646 * Presence of demat account holders in the country : 80% of all pin codes in the country * SUBSCRIPTION OF DEMAT ACCOUNTS TRENDS: Demat account which refers to a dematerialised account. The Demat account is there for individual Indian citizens to trade in listed stocks or debentures the Securities Exchange Board of India (SEBI) requires the investor to maintain a Demat account.
A Demat Account is opened by the investor while registering with an investment broker (or sub broker). The Demat account number which is quoted for all transactions to enable electronic settlements of trades to take place. Let’s get to know everything that is there to know about the Demat account * MEASURES BEING INITIATED BY RELIANCE TO IMPROVE THE SALES OF DEMAT ACCOUNT: * Easy and convenient way to hold securities * Immediate transfer of securities * No stamp duty on transfer of securities Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated) * Reduced paperwork for transfer of securities * Reduced transaction cost * No “odd lot” problem: even one share can be sold * Change in address recorded with a DP gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately. * Transmission of securities is done by DP, eliminating the need for notifying companies. Automatic credit into demat account for shares arising out of bonus/split, consolidation/merger, etc. * A single demat account can hold investments in both equity and debt instruments. * Traders can work from anywhere * CUSTOMER GRIEVANCES REGARDING THE DEMAT ACCOUNT ;amp; HOW THE PROBLEMS ARE ADDRESSED: First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents which serve as proof of identity (POI) and proof of address (POA) as specified by SEBI.
Apart from these PAN card has to be shown in original at the time of account opening from April 01, 2006. All applicants should carry original documents for verification by an authorized official of the DP, under his signature. Investor has to sign an agreement with DP in a depository prescribed standard format, which gives details of rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference.
The DP will open the account in the system and give a unique account number, which is also called BO ID (Beneficial Owner Identification number) and used for all future transactions. 1 They can call the Directly to the Customer Support and they can call the Customer Relationship Manager . 2. Visit to the Nearest Branch and they can Write the Report what the Problem they are facing * SEBI’s GUIDELINES OR ANY OTHER REGULATIONS GOVERNING THE OPERATION OF DEMAT ACCOUNT: “SEBI Only the Regulation Governing the Operation of the DMATE account” 1. Power to make rules for controlling stock exchange :
SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI fixed the time of trading 9 AM and 5 PM in stock market. 2. To provide license to dealers and brokers : SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any financial product is of capital nature, then SEBI can also control to that product and its dealers. One of main example is ULIPs case. SEBI said, ” It is just like mutual funds and all banks and financial and insurance companies who want to issue it, must take permission from SEBI. “