A depository is like a bank for shares instead of money. Instead of holding shares in the form of certificates, investors have accounts in the depository and are able to move securities and settle stock exchange transactions by an electronic update of their accounts. Virtually all established markets have depositories including India, Japan, Malaysia, Pakistan, Sri Lanka, Thailand, UK and USA. The core service of a depository is the efficient delivery, settlement and transfer of securities through a computerised book entry system.
The need for a depository arose from shortcomings in the present settlement system, resulting in:
- lengthy delays in delivery, settlement and transfer of securities;
- tedious procedures for verification of securities and transfer deeds;
- considerable time involved in dispatching cash dividends and bonus shares;
- serious problems associated with physical custody;
- tedious procedure involved in pledging physical securities to raise capital.
- CDBL, by converting physical certificates into electronic form, will eliminate the risks of damaged, lost, forged and duplicate share certificates. The instantaneous delivery through electronic book entry will result in immediate transfer of ownership, which presently can take over a month. CDBL, in the long term, will also reduce the costs of the investing public.
Investors will enjoy many benefits in buying and selling shares in the depository mode, such as:
- Instantaneous transfer: no delays in delivery, settlement or transfer
- Elimination of risks associated with physical certificates such as fake, duplicate shares, protection against loss, mutilation or theft of share certificates etc.
- Reduced hassle of paperwork
- Faster settlement cycles
- Convenient method of consolidation of folios / accounts;
- Holding investments in equity, debt instruments and Government Securities in a single account
- Speedy disbursement of non-cash corporate action benefits like bonus and rights into investors' accounts
- Electronic credit of new issues (IPO) into investors' accounts
- Regular account status updates available to investors at any point of time
Investors may open an account with any CDBL participant (for an up to date list of participants, see Listed Participants).
The participant will request the investor to sign an agreement which will set out the rights and duties of both the investor and the participant. The participant will then open an account for the investor at CDBL. Normally the account will be in the name of the investor. If the participant is going to mix one investors securities with another in an omnibus account then this must be specifically stated on the agreement. Where the account is in the name of the investor then the Law provides that the account holder is a member of the company even though his securities are dematerialised. The participant is required (under the regulations) to provide statements on at least a monthly basis if there are movements on the account. Even if there are no movements, the participant must provide a quarterly statement.Please refer to the Forms Download Page for a list of forms related to account opening.
This will depend on which participant you use. The amount the participant will charge you is not fixed by the Law or the Regulations.
Yes. However, CDBL will charge your participant a fee for rematerialisation, which may be passed on to you.
Your securities will be transferred to your heirs or rematerialised in accordance with normal legal procedures.
Yes, but you will need to agree with your participant whether both signatures or only one are required on any instructions affecting the account.
You may do this if you wish. However, in this case, you will need to wait until the issuer has confirmed that the securities have been dematerialised before the broker can enter the sell order into the market. This will take at least 48 Hours.
The first and foremost activity for any investor willing to invest in the stock market is to have a bright and strong mindset. As the stock market comes with a high amount of risk it is crucial for the investor to evaluate the conditions and make investments accordingly. As high risk brings out high returns, it might also be the case of incurring losses as well. Hence, in order to succeed in the stock exchange one should be ready to bear the effect of both situations.
In order to invest in the stock exchange and carry out buy trading activities one should first open a Beneficiary Owner’s or BO account. This account is usually opened through any stock-brokerage company listed in the stock market. This account is registered systematically, holding the investors’ finance as well as the shares they have purchased, acting as a digital wallet. To open one needs to submit identification documents such as a National ID card, and bank account details for their investment to be sent to others. One can easily open a Beneficiary Owner’s (BO) account within a day’s time by submitting the required documents.