DP Audit

B Samrish & Co.

BY SAMRISH BHANJA(FCS, LLB)MANAGING PARTNER,

B SAMRISH & CO

DEPOSITORY PARTICIPANTS AUDIT

B Samrish & Co.

INTRODUCTION & HISTORICAL BACKGROUND

INTRODUCTION & HISTORICAL BACKGROUND

In the past when there was just a handful of investors the system of

settlement based on physical delivery of paper certificates was

probably adequate

But with the increase in number of listed entities the clearing and

settlement mechanisms had been encumbered by the huge volumes

of paperwork related to processing of share certificates.

Need for the introduction of scripless was felt for the settlement to

improve the efficiency of the markets and eliminate various problems

brought about by dealing in physical certificates.

Thus The Depositories Act was passed by both the Houses of

Parliament in August, 1996.

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CONCEPT OF DEPOSITORY SYSTEM

According to section 2(e) of the Depositories Act, 1996, “Depository

means a company formed and registered under the Companies Act, 1956

and which has been granted a certificate of registration under section

12(1A) of the Securities and Exchange Board of India Act, 1992”.

A Depository Participant (DP) is an agent appointed by the Depository

i.e. —National Securities Depository Ltd (NSDL) and/or Central Depository

Services Ltd (CDSL) and is authorized to offer depository services to all

investors. An investor has to open his account through a DP only. Thus,

the DP is basically the interface between the investor and the Depository.

PNB is a DP of both Depositories (NSDL as well as CDSL.).

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The Depositories Act, 1996

The depositories legislation as per the Statement of Objects and Reasons appended

to the Depositories Act, 1996 aims at providing for:

A legal basis for establishment of depositories to conduct the task of

maintenance of ownership records of securities and effect changes in ownership

records through book entry;

Dematerilisation of securities in the depositories mode as well as giving option

to an investor to choose between holding securities in physical mode and

holding securities in a dematerialized form in a depository;

Making the securities fungible;

Making the shares, debentures and any interest thereon of a public limited

company freely transferable; and

Exempting all transfers of shares within a depository from stamp duty.

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CONSTITUENTS OF DEPOSITORY SYSTEM

There are basically four participant:

The Depository

The Depository Participant

The Issuing Company

The Investor

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WHO IS DEPOSITORY?

Depository facilitates holding of securities in the electronic form and enables securities

transactions to be processed by book entry by a Depository Participant (DP), who as an

agent of the depository, offers depository services to investors

As per SEBI: A depository is an organisation which holds securities (like shares,

debentures, bonds, government securities, mutual fund units etc.) of investors in electronic

form at the request of the investors through a registered depository participant. It also

provides services related to transactions in securities.

As per CDSL: A "Depository" is a facility for holding securities, which enables securities

transactions to be processed by book entry. To achieve this purpose, the depository may

immobilize the securities or dematerialise them (so that they exist only as electronic

records).India has chosen the dematerialisation route. In India, a depository is an

organisation, which holds the beneficial owner's securities in electronic form, through a

registered Depository Participant (DP). A depository functions somewhat similar to a

commercial bank. To avail of the services offered by a depository, the investor has to open

an account with a registered DPB Samrish & Co.

FEATURES OF DEPOSITORY SYSTEM IN INDIA

1. In the depository system, the apex body is the Depository..

2. A depository can be compared with a bank

3. Depository services through depository participants.

4. Fungibility

5. Registered Owner/ Beneficial Owner (two types of owner)

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A BANK-DEPOSITORY ANALOGY

BANK DEPOSITORY

Holds funds in an account on behalf of a customer

Holds securities in an account on behalf of an investor.

Transfer funds between accounts on the instruction of the account holder.

Transfer securities between accounts on the instruction of the account holder.

Physical handling of funds is avoided. Physical handling of securities is avoided.

Provides safe custody of fund Provides safe custody of securities.

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WHO IS DEPOSITORY PARTICIPANT:

A Depository Participant (DP) is an agent of the depository through

which it interfaces with an investor.

A DP can offer depository services only after it gets proper

registration from SEBI.

A DP is just like a Branch of a Bank.

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B Samrish & Co.

DEPOSITORY PARTICIPANT

WHO CAN BE DEPOSITORY PARTICIPANT?

In terms of the Depositories Act, 1996, SEBI (Depositories & Participants)

Regulations,1996, only the following entities are eligible to become a

Depository Participant:

Financial Institutions,

Banks, including approved foreign bank

Custodians,

Stockbrokers,

A clearing corporation or a clearing house of a stock exchange

A non-banking finance company,

A registrar to an issue or share transfer agent

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SUBMISSION OF REPORTS & DOCUMENTS

INTERNAL AUDIT AND CONCURRENT AUDIT OF OPERATIONS OF DEPOSITORY PARTICIPANTS

The two Depository service providers in India, viz., National Securities

Depository Ltd. (NSDL) and Central Depository Services (India) Limited (CDSL)

have allowed Company Secretaries in Whole-time Practice to undertake

internal / concurrent audit of the operations of Depository Participants (DPs).

Report/ Document Frequency Due date To be submitted By

Internal audit report Half yearly 15th May & 15th November

Main & branch DP

Report of Concurrent audit of risk prone areas

Half yearly Along with internal audit report

Main & branch DP

BO grievance report- (format Comm. 1529 & for soft Comm. 1720)

Monthly 10th of next month Main DP (include branch report

Compliance report for Internal audit/ Inspection

within 30 days Main / branch DP

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SCOPE OF AUDIT

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SCOPE OF AUDIT

The scope of Internal Audit was to verify the transactions executed in DP and to assess whether the operations of the DP are in accordance with the Regulatory requirements. The said assignment to be carried out as per the requirement of Depository Act, 1996, SEBI (Depository & Participants) Regulation, 1996, NSDL Bye-laws and the agreements with the clients and NSDL.

Audit of Organisational Structure :

Audit of DPM Operations :

 Audit of Account opening procedures :

 Audit of Demat request :

Audit of Delivery Instructions :

Back office software :

Account closure initiated by the participant;

Investor grievances received by the participant;

Power of attorney modifications;

Providing transactions statements to clients.

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ACCOUNT OPENING

ACCOUNT OPENING

Whether proof of identity and residence is collected as per NSDL requirements. (Circular No. NSDL/PI/2000/1394 dated April 09, 2000)

Whether necessary documents are collected from clients such as corporates, NRIs, OCBs, FIIs, etc.

Whether necessary documents are collected from Speed-e users at the time of opening Speed-e account, resetting password, adding pre-notified accounts, etc.

Whether the procedure for dispatch of the smart card and the PIN (in case of Speed-e users) is diligently followed by the DP, i.e., sending the smart card and the PIN separately.

Whether DP has maintained the records in its internal database with respect to details of Speed-e application forms as per NSDL requirements.

Whether an agreement is executed with every client. Whether the client is given copy of the agreement and the

schedule of charges. Whether there is a system in place to ensure that the client

accounts are not opened in the name of the partnership firm, proprietorship firm or in the name of HUF.

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ACCOUNT OPENING: BASIC INSPECTION Whether the client signature has been appropriately stored in physical form and scanned

into the system. Whether the data entry in the system is strictly and completely in accordance with the

information furnished by the client in the account opening form and as per NSDL requirements.

Whether there is adequate mechanism to ensure that all the account opening forms accepted are in fact entered in the DPM system and the client is given the client ID only after account comes in ‘Active’ status. (Circular No. NSDL/PI/98/583 dated November 18, 1998)

Whether there is a mechanism in place to ensure that the changes in the demographic details are updated in the DPM system (say, for change of address, etc.) based on proper authorisation and only after collecting new proof of address from the client.

Whether the procedure followed for opening the accounts and servicing illiterate person followed as per NSDL requirements. (Circular No. NSDL/PI/2000/0709 dated May 03, 2002)

Whether any supplementary agreement/ letter of confirmation, etc. is executed in addition to standard DP Client agreement.

Whether adequate documents maintained for closure/freezing/unfreezing of client account. This included the procedure followed by the Participant in respect of accounts, which did not have any balance at the time of closing the account.

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ACCOUNT OPENING: AGREEMENTS TO BE EXECUTED

Every participant shall enter into an agreement with a beneficial owner before acting as a participant on his behalf.

Agreement to be executed before opening an account Agreement to be executed under stamp & signature of DP Printed agreement with printed name of DP and signed Agreement not produced for verification at the time of inspection Account to be opened based on Account Opening Form Single form for multiple accounts of same exchange for a CM To be in specified format as per Bye laws (new clauses as per

comm. 1597 ) Agreements to be signed by both the parties Witness for DP and BO required

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ACCOUNT OPENING : PROOFS

Proof of Identity

Proof of Address

Proof for bank details

Observations:

No POI

PANCARD given does not match. Any other POI obtained if PANCARD is not there or it mismatches.

Comment whether the account is freezed for debit, if no PANCARD or it mismatches

Non-compliance pointed should be as per SEBI guidelines only

Bank statement obtained as proof of address(comm.807,967)

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ACCOUNT OPENING : In person verification

SEBI Circular SEBI/MIRSD/Cir. No. 02/2010 dated January 18, 2010

‘In Person’ Verification done for opening beneficial owner’s account by a Depository

Participant (DP) will hold good for opening trading account by a stock broker and vice versa, ‘In Person verification is mandatory and to be done before activation of the account

DPs to do In Person verification of the applicants at the time of opening of demat accounts

Authorized official of DP should personally verify the photograph(s) affixed on the AOF and

proof of identity document

DP to affix a stamp “In Person verified “on proof of identity document having verified ‘in

person’

Also required to verify valid original proof of identity documents with the copies and affix

“verified with originals” stamp

Authorized official doing in person verification and verification of documents with original

should sign under the DP stamp

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ACCOUNT OPENING: KNOW YOUR CLIENT NORMS

Applicability of KYC Requirements & KRA Regulations

SEBI Circular No. MIRSD/SE/Cir-21/2012/0017 2011 dated October 5, 2011 & SEBI’s Circular No. MIRSD/Cir- 26 /2011 dated December 23, 2011

The KRA system shall be applicable for all new Client accounts opened from January 1, 2012.

An intermediary shall perform the initial KYC of its clients and upload the details on the system of the KRA.

KYC verification ‘Verified with Original’ stamp ‘Verified in –person’ stamp In person verification by stock broker holding or subsidiary company. “Web Camera” allowed Signature of DP official under DP stamp Self Attestation of KYC documents.

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ACCOUNT OPENING

Methodology

Type of documents

Validity of documents

Signature of DP official and stamp

Stamp of In Person verified and verified with original affixed

on a valid POI document (SEBI specified) and signed by the

authorized official of the DP under DP stamp

Verify with the documents that only authorized official of DP

has signed, check the authority of the person doing the

same

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ACCOUNT OPENING : Additional Documents

Additional Documents to be collected from different type of BOs(comm.887,932)

Body Corporate & Corporate CM : Certificate of Incorporation POA- Document registered with registering authority or bank statement or agreement for sale

or leave license agreement or acknowledged copy of income tax return

OCB: Declaration from the OCB that it meets with the guidelines issued by RBI/Ministry of finance Certificate from overseas auditors in form OAC-1 Statement of A/c from the bank

Registered Society: POA –Document registered with registering authority or bank statement or agreement for sale

or leave license agreement or acknowledged copy of income tax return

Banks Certificate of Incorporation or copy of RBI registration certificate in case of scheduled/co-

operative banks POA -Proof of address – document registered with registering authority / agreement for sale/

leave and license agreement / acknowledged copy of income tax return

Mutual funds SEBI Registration Certificate clearly indicating the address of the mutual fund

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ACCOUNT OPENING : Additional Documents

Additional Documents to be collected from different type of BOs(comm.887,932)

Public Trust /Charitable Trust and trust capable of holding property in its name (Registered Trust /Public trust) Certificate of Registration of Trust under the Public Trust Act 1950/Public trust Act of relevant state or

Societies Registration Act,1860 PANCARD of trust Proof of address Proof of registered office address evidenced by document registered with registering authority or bank

statement or agreement for sale or leave license agreement or acknowledgement copy of income tax return

Recognized Funds/trusts /other Similar entities Categories :Employees PF, recognized by PF commissioner under PF Act, 1952,employees Gratuity

fund under payment of gratuity act,1972,superannuation fund formed under guidelines issued by income tax dept., venture capital funds registered with SEBI,ESOP trust formed pursuant to SEBI guidelines

Accounts of the above Funds/trusts /other Similar entities should be opened as they are recognized either with Income tax Act or SEBI

Documents : Certificate of registration Trust deed and rules and/or charter defining their constitution and providing for management thereof List of members on the Board of trustees/Governing body Certified true copy of resolution passed by Board of trustees/Governing body

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ACCOUNT OPENING : AUTHORISED SIGNATORIES & NOMINATIONS

Authorized signatories Names of the authorized signatories, designation and their specimen

signatures duly verified by the managing trustee One passport-size photograph of all authorized signatories with signature

across photograph PAN card of Fund/Trust/Entity POA of registered office address evidenced by document registered with

registering authority or bank statement or agreement for sale or leave license agreement or acknowledgement copy of Income Tax return

Nomination Nomination form signed by all joint holders Only individuals to appoint nominees and be appointed as nominee A minor, represented by guardian, can be appointed as nominee Two witness to sign the nomination form Nomination register to be maintained Nomination registration number ( as per register) to be noted on the

nomination form Details to be captured in CDASB Samrish & Co.

Signatures of all joint holders to be scanned HUF a/c

Karta to sign under the stamp of HUF

Corporate / CM A/c Mode of Operations to be specified & captured in system. Signature of Power of Attorney Holders to be scanned

Financial details and nature of business to be obtained

Photographs to be pasted & not stapled Signature across photograph Details of AOF to be correctly entered in CDAS POI & POA in foreign language – translation in English

required.

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B Samrish & Co.

ACCOUNT MODIFICATION

ACCOUNT MODIFICATION

Bank details Obtaining of bank details and proof made mandatory(comm.887)

Proof of bank account details : Photocopy of cancelled cheque having name of the account holder Photocopy of bank statement having name and address of the BO and not

more than 4 months old Photocopy of bank passbook having name and address of the BO Letter from bank

Address Individuals

Proof of address - verified with original by DP official Corporate

Certified true copy of Form 23 Latest transaction statement received from the DP Verified with original

Confirmation letter to be sent to BO at old as well as new addressB Samrish & Co.

ACCOUNT MODIFICATION

Change in signature of the BO

Individuals

Reason for change of signature

BO to visit personally with valid proof of identity

BO to affix new signature in the presence of a DP official

If BO cannot come personally

Modification form / letter to contain old and new signature

New signature – attested by the BO’s banker

Corporates

Certified true copy of Board Resolution

Fresh list of authorized signatories

Bank – a letter on the letter head of the bank

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ACCOUNT MODIFICATION

Letters confirming modification To maintain the hard copies or soft copies of

letters along with proof of dispatch. If sent in electronic form, provisions of the Information Technology Act, 2000 to be complied with.(comm. 1962 dt. 16.04.2010).

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B Samrish & Co.

DEMATERIALIZATION & REMATERIALIZATION

DEMATERIALIZATION & REMATERIALIZATION

Any person who has entered into an agreement under section

5 shall surrender the certificate of security, for which he seeks

to avail the services of a depository, to the issuer in such

manner as may be specified by the regulations.

The issuer, on receipt of certificate of security under sub-

section (1), 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.

A depository shall, on receipt of information under sub-section

(2), enter the name of the person referred to sub-section (1) in

its records, as the beneficial owner.B Samrish & Co.

DEMATERIALIZATION & REMATERIALIZATION

Date of receipt stamp to be affixed on DRF when received

from BO.

To be sent to Issuer \ RTA within 7 days of receipt

Rejections to be analysed.

Rejected certificates to be sent to BO within 7 days of

receipt.

PODs to be maintained.

Follow-up with RTA to be done

For pending Demat &Remat

For non receipt of documents within 30 days of rejection date.

For physical securities lost in transit B Samrish & Co.

DISCREPANCIES OBSERVED IN INSPECTION REPORTS

Whether Demat request received from BOs are sent to the issuer/RTA within seven days- As informed by the DP.

In case of demat rejection –whether there is a system in place to analyze the demat rejection

Details of dispatch maintained by the DP – Date of dispatch is not mentioned.

The procedure to affix a stamp "surrendered for dematerialization along with DP name, DP ID and BO ID" on the certificates submitted for demat is not followed while processing some demat requests.

The time limits prescribed for processing of demat requests received from BOs are not adhered to in all cases.

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B Samrish & Co.

DELIVERY INSTRUCTION SLIPS

DELIVERY INSTRUCTION SLIPS : ISSUE

Proper inventory management – Reconciliation – Maintenance of stock & issue register

First Issue – Proof of dispatch to be maintained – Should not be handed over to representative of

BO – If handed over to BO – sign of BO maintained

Subsequent Issue – On the basis of requisition slips – Dispatch of DIS booklet, POD to be kept on

record. B Samrish & Co.

DELIVERY INSTRUCTION SLIPS : PROCESSING

Instruction slip serial number to be checked against issue details.

Signatures of all BOs obtained / as per mode of operations . Date and time of receipt stamp affixed. Maker-checker concept followed. POA executed by CM settlement purpose. DIS signed by the POA holder (Authorized person) has to be

kept on record in case of Transactions executed on the basis of POA.

Verifier for slips with value more than 5 lakhs. Two step verification. (Comm. 2487).

Debits in dormant accounts - Two step verification. (Comm. 2487).

Fax Transactions - Original DIS has to be obtained within 3 working.

Execution of transactions based on receipt of digitally-signed electronic instructions as per Procedure in O.I - 17.9.

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DELIVERY INSTRUCTION SLIPS : Areas of concern

Issuance Of DIS booklet Misuse of DIS booklets All rights with one person – especially in branches Issue of DIS booklets without requisition slips Blank signed DIS accepted at DP’s office Reconciliation with broking back office High value transaction verification Execution of transaction in dormant account

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ACCOUNT CLOSURE

ACCOUNT CLOSURE

Closure initiated by BO

Closure initiated by DP

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Initiated by BO

Duly filled ACF/Letter from BO

Signatures of all BOs

In case of transfer of holdings –

Duly filled in instruction slip

Transaction statement for the quarter

Account closed / to be closed

Proof of despatch

Final statement of account showing zero balance

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Initiated by BO

Power of Attorney holder cannot close

Procedure for transfer to be initiated within 2 days from date of

receipt

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Initiated by BO

Closure with pending demat

Non responding issuers / RTAs

BO to submit

A letter in prescribed format requesting rejection

A letter giving details of DRN details duly signed and

stamped by the DP

DP to follow up with Issuer?RTA for rejection

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Withdrawal of DP

Option to BOs

Transfer to another DP

Rematerialise

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Shifting of account

New account in the same order of names

Documents to be submitted

ACF

Instruction slip – duly filled

Unused debit instruction slips

Client master report – stamped and signed by new DP

Verification of names and order of names

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Initiated by DP

Reasons such as :-

Non payment of dues

Violation of agreement with the DP

Transfer to another DP/ Main DP due to closure of branch /

Main DP

Notice of 30 days specifying the reasons

Proof of despatch and copy of the notcie to be maintained

No response – DP can initiate

Transaction statement – as per ‘closure initiated by BOs’

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Delivery Instruction Slips

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New Arrivals

Communiqué no. 846- Safeguards regarding issuance/ use/ execution of DIS and booklets

Issue only one booklet containing not more than 20 slips for individual account holder and not more than 100 slips for non-individual account holder, at a time.

In case of the booklet reported lost/ stolen/ not traceable by the BO, the unused DIS of the said booklet must be cancelled.

Subsequent issue of DIS booklet to the BO should be only after BO has used not less than 75% of the slips contained in the previous DIS booklet

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New Arrivals

Not to issue more than 10 loose DIS to one BO in a financial year (April to March).

The loose DIS should be signed in the presence of an authorised DP official.

DP should mandatorily verify with the BO before acting upon the DIS , in case of dormant account whenever all the ISIN are transferred at a time.

To record the details of the process, date & time of verification (on DIS under his sign) of the transaction where BO has 5 or more ISINs and all such ISINs are transferred at a time.

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New Arrivals

Communiqué no. 847- Future-dated transactions

DPs were instructed to exercise care while entering future-dated transactions so as to prevent error, especially in the future date of the transaction as transaction with execution date greater than 10 days from the date of entry/ upload on the CDSL system will fail.

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New Arrivals

Communiqué no. 884 dated 27.04.2007 – Cautionary note in delivery instruction slip:

“Blank & Signed DIS should not be left with your DP/ Broker”- Rider should be added to DIS.

As and when new stock are ordered.

B Samrish & Co.

Common violations in DP operations

1.  The inventory control mechanism for instruction slip booklets is not proper.

2. Physical inventory of instruction slip booklets is not tallied with the inventory records at prescribed intervals.

3. Some of the DIS issued to BOs do not have pre-stamped BO ID and/or pre-printed serial number.

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Common violations in DP operations

 4.      Some delivery instruction booklets are issued to the BOs without keeping requisition slip (which forms part of the earlier issued instruction slip booklet and has pre-printed instruction slip serial number range of the booklet), on record.

5. The instruction slip numbers are not verified, at the time of receipt from BO, against the issue details.

 6.      In some cases, instructions are executed by the DP on the basis of instruction slips which are not signed by all joint holders or which are not signed as per the ‘mode of operation’. In some cases, the instructions are executed in spite of prima-facie mismatch of signatures.

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Discrepancies in the inspection report

As explained/ informed by DP in case of: Inventory control Issue of first DISProcedure to be followed in case of issue of DIS without

requisition slipDormant accountFax indemnityBlocking of DIS

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New Arrivals

Communiqué No. 956 dated 14.09.2007- Supervision of branches of Depository Participants:

To keep record of identification documents (including photo-identification) of all persons engaged in DP operations

(1) at their main office

(2) at all live-connected branches, and

(3) at back office connected branches

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New Arrivals To maintain documentation at the main office regarding the

scope of activity of each branch (live or back office). This document should include the following aspects:

(1) Services being provided by each branch

(2) Authorization levels of each type of transaction i.e.

- maker/ checker

- limits based on value of transaction.

(3) Record-keeping policy, including exception reporting

mechanism, maintenance of registers, agreements, inventory

of instruction slip booklets, reconciliation procedures (if any

documents are forwarded to the main DP)

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New Arrivals

To ensure that all live connected branches as well as back office connected branches display the types of services provided by each of them. The display board/ chart should be prominently visible to the clients. The DO’S and DONT’S should also be displayed similarly.

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Back office software

Mandatory from 1st April 2007 for DPs with more than 500 accounts

Minimum features Maker-checkerApproval of verifier required for slips with value of

transactions more than Rs.5 lakhs Capture of BO signature and retrieval for verification

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Back office software

Minimum features ( contd…) Proper records of instruction slips

Inventory controlDetails of serial numbers issued to a BOVerification of issue details with instruction slip serial no.

submitted for executionBlocking of serial numbers already usedFacility to block serial numbers – reported as lost/

misplaced

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Back office software

Matching of statement of transaction from CDAS with backoffice Sample selected – bigger clientsGenerate statement of transaction from CDAS and Backoffice

for the same period and compare Back office (including web site) is updated regularly

Check update procedure and frequency Back up of data residing in back office

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Back office software

Back office network connected to InternetTry accessing portals – preferably government sites If connected to internet

Check from system personnel for installation of firewalls Check system policy for access rights

Back office network connected to CDSLCheck upload procedure

Mechanism to ensure integrity of filesCheck system controlsCheck access controls

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B Samrish & Co.

OTHER TRANSACTIONS

Transmission

Transmittee BO with CDSL DP

Receipt of intimation of death Notarized copy of Death Certificate No execution of any instruction other than transmission

request

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B Samrish & Co.

Transmission

Joint holders Sole holder

Nominee

Holding > 100000

Holding < 100000

Transmission

Death of one of the Joint HoldersTransmission in favour of surviving joint holders Duly filled in TRF Notarized copy of death certificate Client master –DPA5 of the surviving joint holders if

a/c is with other CDSL DPTransposition form - If a/c in different order of names

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Transmission Death of Sole Holder – Nominee

Duly filled in Transmission request form(TRF) Notarized copy of death certificateClient master-DPA5 report of the nominee’s a/c if a/c

with other CDSL DP

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Transmission

Death of sole holder - No nomination – value of holding > 100,000Duly filled in TRF complete all respectNotarized copy of death certificateAny of the following :

Succession CertificateLetter of AdministrationProbate of the will

In case of multiple successors- Each successor should submit separate TRF

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Transmission Death of sole holder - No nomination – value of holding

< 100,000Duly filled in TRF complete all respectNotarized copy of death certificateLetter of suretyLetter of indemnityAffidavit from applicantNo objection letter from legal heirs who are not

applicants

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Transmission

Statement of transaction to the transmittee after transmission

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Pledge/ Unpledge

PLEDGE : Pledgor & Pledgee must have active accounts in CDSL

DP PRF should be complete in all respects PSN should be recorded on the PRF Pledgor DP to send PRF and system generated letter to

pledgor Copy of PRF to be kept on record Acceptance of pledge – on the basis of PRF signed by

pledgor DP

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Pledge/ Unpledge

Unpledge Initiated by pledgee – auto unpledge Initiated by pledgor - acceptance by pledgee DPURF should be complete in all respects

Invocation IRF should be complete in all respects

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Rematerialization

RRF in duplicate signed by all the holders

RRN to be generated on CDAS on the same day or the next working day from the date of receipt

RRN noted RRF to be sent to Issuer/RTA within two days of receipt of RRF

Follow up with RTA if not honoured within 30 days from the date of receipt of RRF by the RTA

Corrective action for rejected RRF

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Freeze /Unfreeze

Initiation of Freeze BO as safekeeping measureDP based on instructions received from CDSL or statutory /

regulatory authority CDSL based on instructions received from statutory authority

Verification of signature – BO initiated freeze Acknowledgment letter to be sent to the BO

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Freeze /Unfreeze

Records to be maintained Freeze/ unfreeze requests received from BOsOrders from statutory authoritiescopies of acknowledgement sent to BOs Record of despatch of acknowledgement copy

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Power of Attorney (POA)

Verify signatures of the BO If POA is granted by all joint holders to one person , POA

should be signed by all such holders

Copy of POA – certified as “true copy” by BO

Notarization at the discretion of the DP

If expiry date is mentioned on POA, the same should be captured in CDAS

DP to have internal controls for expiry date

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Power of Attorney (POA)

DP to have internal controls for expiry date POA to single entity should not have any clause which is

detrimental to the interest of the BODelivery Instruction slips to be issued only to POA holder and

not to the BO Instructions to be routed only through the POA holder Merger of balances kept under various accounts to nullify the

debit in any other account of the client without taking any further instructions from the constituent

Lien on the securities of the clients towards realization of the dues including broking related operations.

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BO Grievance

BO GrievanceRegister to be maintained BO grievance report on monthly basis to CDSLResolve the grievance within 30 daysEmail id for grievances(comm.816)

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Transaction statements

Main DP to send transaction statements to all BOs including branch BOs

Transaction statements to be sent at least once at the end of every month, if there has been any transaction. In any event, such statement has to be sent once at the end of each quarter to all BOs

Maker checker concept in all other transaction to check unauthorized transaction

B Samrish & Co.

Records & Documents

Proper filing system and maintenance of details of files for easy retrieval

If records are shifted to a different place – a log of such files Proper records of retrieval

B Samrish & Co.

Records & Documents

Separate record for each depository. Maintain records for a minimum period of 10 years

Verify arrangements made for storage of documentsMaintenance of proper detailsMay check on sample basis

Compliance officer Employee of the DP Intimation of change to the depository

B Samrish & Co.

Records & Documents

Concurrent audit of risk prone areasReport on monthly basis Action taken by the DPConcurrent auditor to inform the serious non-compliances to

depository

B Samrish & Co.

Thank You!!

B Samrish & Co.