Details of a Demat Account - Introduction, Benefits and Steps to Acquire One

A large number of shares are bought and purchased by the investors with SEBI being the regulatory body in the whole process. In line with the protocols of legal authorities, such shares are present in either physical or electronic form. Physical Shares or Share certificates have a paper presence whereas electronic shares are in the dematerialized form stored in the Demat Account of the concerned Investor.  

As stated by the Laws of Companies Act 2013, the complete transaction of Shares and Securities will be in Demat Form effective from 2nd October 2018, which also means from 1 October 2019 no company will be allowed to transfer its shares and securities in physical form. Owing to this current amendment investors have to open a Demat Account under their name by submitting the Dematerialization request.   

An Registrar & Transfer Agent Service provider offers assistance such as dematerialization of shares, complete record-keeping, contact with the national depositories, expert assistance related to investment opportunities or assistance to any other query of the customer.

Demat Account

Dematerialization of Shares is a process in which shares owned by the investor are converted into electronic form and stored in the Demat Account of the respective investor. So clearly a Demat Account holds the shares and securities present in the electronic form to facilitate the investor with online visibility of his purchased shares.  

The concept of Demat Account was initiated by the Securities and Exchange Board of India (SEBI). SEBI is India’s largest regulatory body for all types of share transactions in the Indian market, operating since 1996 in India.

Demat Account is almost equivalent to a bank account. The only difference is that it holds shares, securities, bonds and mutual funds on behalf of the investor. Earlier, holding a Demat Account was recommended to those who trade with shares and securities on a regular basis. But from now onwards it is mandatory for every investor to get a Demat Account regardless of how frequently he is trading on shares. 

Before we jump into the step-wise procedure to open a Demat Account lets get familiar with the two crucial terms with regards to share transactions (i) Depositories and (ii) Depository Participant. 

National Depositories and Depository Participants 

National Depositories - Operating under the surveillance of SEBI, National Depositories are the organizations responsible for holding all the registered shares and securities in the country. There are two major depositories namely National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CSDL). Transactions of all the registered shares and securities is possible only through these two main depositories.       

Depository Participants - These are organizations working as an intermediary between the investor and the main depositories. For opening a Demat Account, the investor needs to approach the Depository Participants. 

Steps to open a Demat Account

Step 1: Approach a DP which can be any financial institution like banks, brokers, etc. 

Step 2: Fill in the application form with accurate details for opening a Demat Account affixing the copies of the required documents.    

Step 3: Once the online documents are submitted by the investor, the officers from the DP comes for the in-person verification.   

Step 4: Once the information is checked for its authenticity, a unique account number is given to the applicant by the DP which is required by the investor to access his/her online Demat Account.   

The expense for opening a Demat Account

Following the completion of the account opening process, the Demat account holder gets an agreement copy from the concerned DP enlisting the terms and conditions, rules and regulations along with the applicable charges. Generally, the DPs offer free of cost Demat Account while there are some who charge a certain amount or some take refundable charges. 

The account holder is charged with the transaction fees along with the annual maintenance fees and the conversion fees (dematerialization of shares and securities). 

Read Also:- Complete Procedure For Dematerialisation Of Shares Under RTA

Points to remember while opening a Demat Account    

1. It takes 7-14 days for a Demat Account to get active.
2. Investors can open different accounts with different DPs. 
3. No minimum share limit is set for opening a Demat Account. 
4. It is mandatory to add a beneficiary while opening a Demat Account
5. KYC is mandatory before opening a Demat Account. 

KYC Conformity

Getting KYC done is mandatory if you want to have a Demat Account. As the process above says that the investor has to apply by submitting the application along with the valid documents to the concerned DP for availing a Demat Account. 

Identity Proof - The copy of any government authorized ID like Adhaar Card, PAN Card, Passport or Voter ID can be submitted by the applicant. 

Address Proof - Applicant’s residence proof like ration card, electricity bill, water bill or any ID Proof having the place of residence mentioned in it. 

Bank Details - It is a must for the applicant to submit his/her basic bank details like bank account number, etc. 

Benefits of owning a Demat Account

• A Demat account eliminates the chances of your shares, securities, bonds and debentures getting misplaced, robbed or damaged. 
• The charges on the transaction of shares is less if done via a Demat Account as compared to the physical one.
• A Demat Account has made transactions more easy and less time consuming for investors. 
• There are no restrictions on the number of shares you buy or sell via a Demat Account. 
• Online transactions and management is far convenient these days than physical transactions of shares. 
• More secure than physical shares transactions. 

Owing a Demat Account gives you all the above facilities simultaneously adhering to the compliance of the Government.

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Revolution of Mutual Fund Industry by RTAs

It is the technology which takes a normal growth rate of business to an accelerated progress dexterity. Whether it is a normal course of operation of an organisation or serving the clients with customer care facilities, technical advancement is necessary to make a win-win. In today’s digital era, if you are not upgraded with technologies and latest utilities, you can not ensure automation, ease and accuracy. 

Last few years evidence the enormous growth & success encountered by Mutual Fund houses. Here as well, the credit goes to high technology, the hi-tech facilities given by the Registrar & Share Transfer Agent (RTA).

It is only because Registrar and Transfer Agents (RTAs) that mutual fund houses could get to the top quickly and amazingly among other institutions of the financial sector such as banks, insurance companies, brokerage firms, etc. 

Read Also:- RTA - An “all-inclusive” Solution for Mutual Fund Investors

RTA agent is a cornerstone behind the astounding progress of mutual fund houses. By introducing & promoting advanced technology in the mutual fund houses, RTA Agent has assured accuracy and value addition in the services of mutual fund houses. 

Technology has transformed the financial sectors in a never-imagined way. Some of the examples include e-investment tools for investors and distributors, intermediary interfaces, data sharing apps, digital transaction systems; they all are techno-driven and bolstered.

Today, it's a matter of a few clicks and seconds to encash the money, to transfer the money, to get monthly payouts, to upload the investment statistics on different platforms. Similarly, executing a Systematic Investment Plan (SIP) with a mutual fund houses, asset management entity or insurance firm has brought high-level of convenience for investors, it would not have been possible without technological advancement.

Now let us shift our focus to Registrar and Transfer Agent and the way they have implemented technological up-gradation in the mutual fund industry to greet the ease, automation, speediness and many other exquisite services in the industry. We all know that RTA is linchpin behind the triumph & popularity of mutual fund houses. Let us march towards the answer to HOW?

A Registrar and Share Transfer Agent like SAG RTA being an intermediary serve the facilities to and interact with every stakeholder while maintaining the records of clients’ transactions on behalf of mutual fund houses. 

Different key stakeholders like asset management companies (AMCs), fund accountants, couriers & postal agencies, exchanges, depositories, depository participants, mutual fund utilities, channel partners, payment aggregators, and banks are served through sustained interfaces.

Management of Data

RTAs also processes & transfers all the investors’ & investment-associated details & data from diversified sources in multiple formats. RTAs regularly interact and help every stakeholder of the mutual fund industry in the management & maintenance of their data.

Import Data in all Formats and Exporting Them in the Relevant One

With the use of technology-based systems Registrar & Transfer Agent meets the diversified needs of different mutual fund investors easily and also exchange data with them in multiple formats which includes  CSV, DBF, Excel, text or advanced XML through web-services.

RTAs use technology-embedded system that creates the output files in accordance to the required data format and also input data in different formats from the stakeholders. Technology allows the RTAs to preserve the input and generate the output in the desired format. 

Read Also:- RTA is a Cornerstone of Mutual Fund Companies. See How?

It is because of the innovative approach of the Registrar & Transfer Agent industry that mutual fund houses could be ahead of the game and break new grounds. RTAs have been in the client’s best interest as well.

High Technology to Serve the Clients

Despite being highly successful & gangbusters, the whole Registrar & Share Transfer Agent industry endures to adopt cutting-edge technologies and implement ground-breaking ideas to serve the mutual fund industry and its clients in the best possible way. 

Adherence to Government Rules & Regulations

RTAs keep updating themselves as per the amendments in government rules & regulations and latest notifications. This up-to-minute leg-up alongside the adoption of lead-forward technology let RTAs like SAG Infotech provide world-class services to mutual fund houses and investors in adherence to legal norms. 

Safety, Security & Reliability

Beyond the shadow of a doubt, RTAs have been the true supporter for mutual fund stakeholders and the non-stop advancement in the RTA’s system & software guarantees reliability, security and confidentiality of big-league financial & investment-related facts & figures. 

Read Also:- RTA Expertise for Mutual Fund Houses and Investors

Reduction in no. of Complaints and Increment in Investments 

Unprecedented technologies of RTA have revolutionised the mutual fund arena in which number of complaints have reduced and the mutual fund investments have grown quickly in the past few years.

Taking the Stakeholder Ahead

Besides, leading off important services, processes and statutory changes in the mutual fund industry, RTAs are driving the industry stakeholders to become a top-drawer with technological advancements through ground-breaking innovation and out of the box ideas. 

Boosts Trust and Credibility within Investors & Regulators

Also, RTAs have upsurge the trust and assurance for mutual fund houses within investors, regulators and stakeholders. With the optimal use of hi-end technologies, RTAs are inviting front-line products, projects and procedures in the mutual fund industry. 

For mutual fund customers as well, RTAs have played no small role by catering the most efficient & valuable facilities to them. 

In the ever-changing dynamic market also, RTAs have potency and foresee to take mutual fund industry parallel or an advance of the banking sector.

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A Guide for Dematerialization of Physical Shares

Differentiating Demat and physical shares

The difference between a dematerialized share and a physical share can be understood as the difference between money saved in the bank account and a physical currency note. A transaction of physical currency notes into a bank is as simple as depositing as compared to the dematerialization of a share certificate which is a time-consuming task.

The shares dematerialization can only be processed if the shares are transferred to the holder’s name. Incase any share is held as a blank transfer cannot be dematerialized until it gets first transferred in the name of a DP account holder. While for the situation, when there is a joint holding of shares, they can only be dematerialized in case the shareholders having a DP account in the same order. For a proper understanding of the transfer of shares, you are required to consider given below facts.

Ponder to Demat your shares, follow the steps listed below to get dematerialized your physical shares. 

• Firstly collect your Dematerialization Request Form from your DP. 
• Provide the details required to fill in the form such as the account holder’s name, client ID, details of shares listed to get dematerialized along with the signatures of all the account-holders in the lower section of the form. 

Read Also:- Role and Responsibility of a Registrar and Share Transfer Agent in Mutual Fund Houses

Things need to be considered before sending shares to Demat land:

• Ensure shares' availability for dematerialization.  
• For different companies, there is a need for filing separate requests. 
• A separate request requires different ISIN (International Securities Identification Number) numbers which can be obtained from the DP by showing the share certificates. The shares which are transferred for the dematerialization should be held in the same name, and the order of holders also the mentioned details should be similar in the opened DP account. 
• Now proceed to write “Surrendered for dematerialization” across the face of the certificate. 
• Punch two holes on the certificate.
• Submit these shares certificates available for dematerialization along with the Dematerialisation Request Form to the DP to proceed further. 

The reason behind the defacing of the certificates is that they will eventually be destroyed and no one can misuse these physical share certificates.

What happens after the shares leave your desk

After leaving the desk, the depository performs internal processing on shares and pass them on to the related company for dematerialization purpose. The company now proceed for the verification of the details in the request form and the signature matching as well from the sample stored in their records. In case no issue is found in the request, the company dismantles the certificates and makes a transfer entry of dematerialized shares into the client ID against the received request.

In case, any mismatch issue is found in the request, the company returns the shares to the DP along with the concerned reason for rejection. Now the DP will contact the client for the rectification of the issue and the shares will again be sent to the company for dematerialization. This is the whole process of converting physical shares to digital shares.

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Detailed Procedure for Grant or Renewal of RTA Certificate by SEBI

Registrar and Share Transfer Agent (RTA) is an organization that is designated to operate as an intermediary between investors and mutual fund houses. Registrar & Share Transfer Agent regulates all financial and non-financial processes like maintaining investor’s transaction records, processing those records for further reporting to the authorities, granting various application forms and assistance related to mutual fund investments. Mutual fund houses deal with investor’s daily transactions whereas RTA manages the records of such transactions on behalf of the mutual fund house associated with it.   

SAG RTA Registrar and Share Transfer Agent, CAMS, and Karvy are some of the prominent RTA service providers in India who serve investors as well as mutual fund houses with utmost care and responsibility. With their widespread branches, these RTA service providers can reach out to their clients present anywhere in the country. 

Investors can reach out to RTA for assistance related to security dematerialization by major depositories (NSDL or CDSL), issuing share transfer certificate, updating name, address or signature, dividend payouts and lot more.

SAG RTA, Registrar and Transfer Agent Services, is capable of solving investor’s issues and introducing them to various profitable mutual fund schemes and offers. 

 

All the RTA service providers operating in India are certified by the Security Exchange Board of India (SEBI). RTAs operating in India adhere to the guidelines listed in the Security Exchange Board of India (SEBI) Regulations 1993. 

Requisites for Qualifying as an RTA Service Provider from SEBI

Initially, the applicants must fill Form A along with the fees of Rs. 6 Lakhs  (non-refundable) for category 1, for category 2 the fees is Rs. 2 Lakhs (non-refundable). 

 

After filing the form, the board asks for additional information (not mentioned in Form A) as per the preset criteria. Even the applicant himself needs to appear in the board office before the board giving approval for performing RTA Services to the applicant.  

 

In case of any default, the board is authorized to reject the application. It will provide the statement mentioning all the errors and will give another chance to the applicant for fulfilling all the requirements within a given time limit.

Detailed Registrar and Transfer Agent Registration Procedure with SEBI

1 Applying for Certificate of Registration via Form A

The very first step towards becoming a SEBI registered RTA service provider is filing an application with the help of Form A to SEBI.   

2. Categories under which one can apply to become Registrar and Share Transfer Agent 

RTA services are divided into two categories either of which can be chosen by the applicant: 

• Category I: Carrying out services as both Registrar to an issue and share transfer agent.
• Category II: Carrying out services either as a registrar to an issue or as a share transfer agent. 

3. The applicant needs to provide further information to SEBI

The Board may ask the applicant to provide additional information necessary which is not mentioned in Form A and is required for issuing the certificate for Registrar and Transfer Agent registration. The board may ask the applicant or concerned principal officer to walk up to the board office for personal representation before the Board.   

4. Re-apply if the board rejects your application

As per the sub-regulation (2) of regulation 3 of the SEBI Act 1992, the board has the authority to disapprove Form A based on some errors in the information or non-adherence to the instructions. The Board will give a second chance to furnish form A within a given time limit. One must make sure that all the conditions mentioned in Form A should be fulfilled.

5. Scrutiny of the Candidate’s Application

Before granting the approval to work as a certified RTA, SEBI will thoroughly inspect all the aspects and make sure that everything favors a successful approval.

SEBI will make sure of the following points before granting approval:

1. The applicant must have sufficient infrastructure, the latest equipment/techniques and an expert team to effectively handle RTA processes.  
2. The applicant must have knowledge related to RTA services. 
3. The applicant must not be related (directly/indirectly) to a person who has been earlier rejected by the SEBI board to operate as an RTA. 
4. The applicant must have adequate capital to perform as RTA, mentioned in regulation 7 under SEBI regulations
5. Is under the radar of any disciplinary proceedings as per the SEBI Act for any of the director/applicant partner/principal officer has been found guilty for an economic offense, involving moral turpitude. 
6. Is a fit or proper person (mentioned in schedule II of securities and exchange board of India (intermediaries) Regulation, 2008.

6. Capital Adequacy as suggested by SEBI

The capital sufficiency requirement for an applicant to get certified as an RTA as per SEBI guidelines: 

• Category 1: the net worth for an applicant should be min Rs. 50 lakh and can go beyond.
• Category 2: the net worth of the applicant must be min Rs. 25 lakh.

6.2 The term ‘net worth’ given here has been defined under the sub-regulation (3) of SEBI, which denote:

In case, if the applicant is a firm or association of persons or any body of individuals, the total value of capital contributed to such business by the applicants, and free reserves of any kind to their business are accounted as net worth.

In the case of a corporate body, total net worth is the actual value of paid capital and free reserves that are registered in the application account books at the time of submission of application for grant of certificate to operate as an Registrar & Transfer Agent, according to the sub-regulation (1) of regulation 3 of SEBI.

7. Process for further registration

SEBI, after working upon the eligibility criteria and finding candidates eligible for performing as an Registrar & Transfer Agent Services provider, is obliged to extend a notice informing the candidates about their eligibility and category under which they can serve as a certified Registrar Transfer Agent. It is indeed the responsibility of the board to inform the candidate about the eligibility criteria for grant of certificate in Form B, which also depends upon the fee payment given under regulation 12 of SEBI.

8. Criteria for RTA Certificate Renewal 

The registrar to an issue or share transfer agent must apply for the renewal of the RTA certificate three months before its expiry period. The RTA service provider can do so with the help of Form A.

8.1 The renewal application must be processed in a way similar to applying for a fresh RTA certificate stated under regulation 3 by the Board.  

8.2 Criteria for Certificate Renewal

The below-mentioned conditions get applied in case of renewal granted under the registration 9 or any registration granted in accordance with regulation 8:

• In case an applicant applies for status or constitution change, prior Board permission is required to operate with the same power post-change.
• A certain amount is paid by the applicant for the renewal of the RTA certificate. The amount is determined by the SEBI. 
• Capital adequacy will be re-examined by the authorities. The applicant must fulfill all the requirements under regulation 7 of SEBI from the grant of the certificate until its expiry.
• SEBI approved RTA service providers must not take more than a month to resolve all the grievances from investors, to continue working as an RTA and subsequently inform all its stakeholder members about details like total complaints, etc.
• The candidate must comply with all the SEBI regulations while carrying out its activities as a registrar to an issue or share transfer agent before applying for a renewal. 

9. The procedure, in case, application for grant of certificate gets Rejected

9.1. In case the application for granting or renewing the RTA certificate fails to abide by SEBI guidelines then the Board has the right to disqualify the application but has to give the opportunity to re-apply fulfilling all the preset requirements by SEBI.

9.2 The Board informs the applicant about the rejection of his RTA certificate within three days from the date of applying for certificate along with the valid reason for the refusal.

9.3 Applicant can re-apply to the Board within thirty days from the date of getting a rejection notice from the Board post consideration, as per sub-regulation (2) of SEBI guidelines.

9.4 On receiving the application for reconsideration by an applicant, the Board will re-scrutinize the application and report the conclusions in a written format to the applicant. 

10. RTA Certificate (Grant or Renew) Refusal Consequences

Candidates whose application for granting or renewing the RTA certificate gets rejected by the Board, from the date of receiving the rejection notice are not eligible to perform any RTA related activities. Valid under regulation 2 of regulation 10 of SEBI.     

11. Payment Fees for a Grant or Renewal of RTA Certificate

11.1 The candidates, applying for a grant or renewal of RTA certificate in order to operate as a certified RTA agent should submit a certain amount as the processing fee to the Board within the specified time period and in a manner as given under Schedule II of SEBI regulations.

If the candidate fails to pay the renewal fees, the Board has the right to cancel or suspend his certificate, as a result, the registrar and share transfer agent will not be able to further extend its services to its clients as an RTA service provider or provide any RTA forms to the clients.   

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