Overview of Depository Participant SEBI Registration

Depository Participant is an agent or the registered stockbroker of a depository. A depository is an organization/institution which holds the securities of an investor via the DP or Depository Participant & also provide services in relation to the securities and it holds the investors’ securities in the form of shares, debentures, bonds, mutual fund units, etc. in a digital form and it also acts as a link between the companies which issues shares & its shareholders. An individual or a person cannot directly contact the depository. Through the Depository Participant, an individual can open & maintain a Demat Account and they are link between the investors & depository. An agreement between the Depository Participant & the Depository regulates their relationship. Depositories Act, 1996 defines a DP as an individual registered under Section 12 of the SEBI Act 1992. Section 12 of the SEBI Act, 1992 states that no Depository Participant shall buy, sell or deal in securities unless registered with SEBI.

Functions of a SEBI registered Depository Participant:

• They help investors to open accounts;
• Dematerialization: It is the process of converting the physical certificates of investors into an equivalent number of securities in digital form;
• Remat of Securities: It is the process of converting securities held in e-form in the Demat account back to the form of the physical certificates;
• Transfer of securities;
• Pledging & Unpledging of securities for a loan against shares;
• Trades settlement which are done on the exchange associated with the depository.
• Corporate action benefits like directly transferring securities to the customers’ Demat & bank account.

Types of Depository Participants

At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.

National Securities Depository Limited (NSDL)

National Securities Depository Limited, or NSDL provides depository services to issuers, intermediaries, and investors in the Indian securities market.

The services offered by NSDL include the conversion of physical securities into electronic form, known as dematerialisation, and the conversion of electronic securities back into physical forms, known as rematerialization. It also provides features for corporate operations such as electronic settlement of securities trades, pledge and hypothecation of securities, and dividends and bonuses.

Central Depository Services Limited (CDSL)

Central Depository Services Limited, or CDSL. CDSL offers the services of dematerialisation of securities, which involves transforming physical securities into electronic form, and dematerialisation, which involves transforming electronic securities back into physical form. CDSL is governed by the Securities and Exchange Board of India (SEBI).

What is the Difference Between Bank and Depository?

Eligibility Criteria for Depository Participant SEBI Registration

The NSDL and CDSL have added additional eligibility requirements to be registered as DP under them in addition to the previously mentioned ones. In their Bylaws, the NSDL and CDSL have the authority to establish their own eligibility requirements. They are

• For NSDL registration, a stockbroker must have a minimum net worth of Rs. 3 crores, and for CDSL registration, a minimum net worth of Rs. 2 crores.
• Under the CDSL's "Limited Depository Participant" category, a stockbroker with a net worth of Rs. 1 crore
• SEBI or any stock exchange should not bar, expel, or suspend the applicant for DP under NSDL.
• The applicant for DP under NSDL should not have been convicted of any of the following offences: theft, forgery, fraudulent conversion, embezzlement, or misappropriation of funds and securities.

Documents Required for Depository Participant Registration in India

A Depository Participant (DP) acts as an intermediary between investors & the depository (NSDL/CDSL) to facilitate electronic trading and holding of securities. To register as a Depository Participant with SEBI and a depository (NSDL/CDSL), the following documents are required:

1. Business Entity Documents:

• Certificate of Incorporation (for companies)
• Memorandum of Association (MoA) & Articles of Association (AoA)
• Partnership Deed (for partnership firms)
• LLP Agreement (for LLPs)
• Board Resolution for DP application

2. Regulatory Approvals:

• SEBI Registration Certificate (if applicable)
• Net Worth Certificate from a Chartered Accountant
• Copies of registration with other financial regulators (if any)

3. Financial Documents:

• Latest Audited Financial Statements (Balance Sheet & Profit & Loss)
• Income Tax Returns (last 3 years)
• Net worth statement certified by a CA

4. Infrastructure & Compliance Documents:

• Office space ownership/lease agreement
• IT infrastructure declaration for handling electronic securities
• Cybersecurity framework compliance (as per SEBI guidelines)

5. KYC & Personal Documents of Directors/Partners/Authorized Signatories:

• PAN Card & Aadhaar Card
• Passport-size photographs
• Address proof (Electricity Bill/Bank Statement)
• Director Identification Number (DIN)
• Qualification & experience certificates

6. Depository Agreement & Undertakings:

• DP Agreement with NSDL/CDSL
• SEBI Prescribed Undertakings & Declarations
• Fit & Proper criteria declaration

Process for Depository Participant SEBI Registration

The following is the process for registering a Depository Participant with the NSDL and CDSL:

• A Form E application and the required paperwork listed below—the Board Resolution authorizing the applicant to become a Participant and the Networth Certificate—must be submitted by the applicant who wants to be registered as a DP with NSDL.
• Form A contains the applicant's information.
• SEBI requires additional information.
• If the applicant and their subsidiaries are listed as participants in a stock exchange or CDSL, the CDSL must issue a status report.
• The applicant's business history, background of the directors' and promoters' experience, should be submitted in the format required.
• Payment of the entry and application fees.
• The application will be presented for approval to the NSDL Member Committee. After being accepted, the application will be sent to SEBI for NSDL DP registration.
• Following approval by the NSDL Member Committee, the applicant will need to install the required hardware, software, and infrastructure. The applicant's installations will be inspected on-site by the NSDL prior to activation.
• The applicant will be activated as a Participant in a pilot environment for testing purposes after NSDL completes the inspection.
• It is the applicant's responsibility to acquire the necessary computer hardware and connect to CDSL. Additionally, the applicant must have two trained employees who have either completed five days of CDSL-led DP training or are NISM certified.
• After hardware and connectivity are installed, the CDSL will submit the application to SEBI for approval.
• An applicant will receive a Certificate of Registration from SEBI upon approval and payment of registration and annual fees.
• After that, the applicant will sign a contract with CDSL to become a DP of CDSL.
• In order to create a DP account with CDSL, a unique DP-ID number is generated upon entering into the agreement.

Penalty

Any registered issuer who does not provide the investors with the certificate of securities within the allotted time is subject to a penalty of Rs. 1 lakh for each day that the failure persists.