2. Services of Depository:
Any person, through a participant, may enter into an agreement, in the specified form with any depository for availing its services (Sec. 5).
3. Surrender of Certificate of Security:
(a) Any person who has entered into an agreement with the depository will have to surrender the certificate of security, for which he seeks to avail the services of a depository, to the issuer; (b) The issuer, on receipt of certificate of security shall cancel the certificate of security and substitute in its records the name of the depository as a registered owner in respect of that security and inform the depository accordingly; and (c) the depository, thereafter will enter the name of that person in its records, as the beneficial owner (Sec. 6).
Registration of Transfer of Securities with Depository:
Every depository shall, on receipt of intimation from a participant, register the transfer of security in the name of the transferee. Further, if a beneficial owner or a transferee of any security seeks to have custody of such security, the depository shall inform the issuer accordingly (Sec. 7).
5. Options to Receive Security Certificate or Hold Securities with Depository:
Every person subscribing to securities offered by an issuer shall have the option either to receive the security certificates or hold securities with a depository (Sec. 8).
6. Securities in Depositories to be in Fungible Form:
All securities held by a depository shall be dematerialised and shall be in a fungible form (Sec.
7. Rights of Depositories and Beneficial Owner:
A depository shall be deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of a beneficial owner. The depository as a registered owner shall not have any voting rights or any other rights in respect of securities held by it. The beneficial owner shall be entitled to all the rights and benefits and be subjected to all the liabilities in respect of his securities held by a depository (Sec. 10).
8. Register of Beneficial Owner:
Every depository shall maintain a register and an index of beneficial owners in the manner provided in Section 150, Section 151 and Section 152 of the Companies Act, 1956 (Sec.
9. Pledge or Hypothecation of Securities Held in a Depository:
A beneficial owner may with the previous approval of the depository, create a pledge or hypothecation in respect of a security owned by him through a depository.
Every beneficial owner shall give intimation of such pledge or hypothecation to the depository and such depository shall thereupon make entries in its records accordingly (Sec. 12).
10. Furnishing of Information and Records by Depository and Issuer:
Every depository is required to furnish to the issuer information about the transfer of securities in the name of beneficial owners at such intervals and in such manner as may be specified by the bye-laws. Every issuer also has to make available to the depository copies of the relevant records in respect of securities held by such depository (Sec. 13).
Option to opt out in Respect of any Security:
If a beneficial owner seeks to opt out of a depository in respect of any security, he shall inform the depository accordingly who will make appropriate entries in its records and shall inform the issuer (Sec. 14).
12. Depositories to Indemnify Loss in Certain Cases:
The depository shall have to indemnify any loss caused to the beneficial owner due to its negligence or of the participant. Where the loss due to the negligence of the participant is indemnified by the depository, the depository shall have the right to recover the same from such participant.
13. Systems and Procedures:
Every depository shall have systems and procedures which will enable it to co-ordinate with the issuer or its agent, and the participants, to reconcile the records of ownership of securities with the issuer or its agent, as the case may be, and with participants, on a daily basis. (Regulation 30 of SEBI)
Internal monitoring, review and evaluation of systems and controls:
Every depository shall have adequate mechanisms for the purposes of reviewing, monitoring and evaluating the depository’s controls, systems, procedures and safeguards.
15. External monitoring, review and evaluation of systems and controls:
Every depository shall cause an inspection of its controls, systems, procedures and safeguards to be carried out annually and forward a copy of the report to the SEBI.