Answer: A Depository Participant (DP) is an agent of the depository through which the depository provides its services to investors. It is the link between the depository and the investor.
The depository system has four constituents: the depository, the Depository Participant, the beneficial owner (investor) and the issuer company (through its Registrar and Transfer Agent). Investors cannot deal with NSDL or CDSL directly; they deal only through a DP.
- Who can be a DP: banks, financial institutions, stock brokers, custodians and NBFCs registered with SEBI under the SEBI (Depositories and Participants) Regulations can act as DPs.
- Opening accounts: the DP opens and maintains the demat (beneficial owner) account of the investor after KYC.
- Dematerialisation and rematerialisation: the DP receives the Demat Request Form (DRF) with physical certificates and forwards it to the company/RTA; it also handles requests for rematerialisation (RRF).
- Transfer of securities: on receiving the Delivery Instruction Slip (DIS) it debits or credits the investor’s account for sale, purchase or gift of securities.
- Statement of holding: it sends periodic statements of holding and transactions to the investor.
- Other services: pledge and hypothecation of securities, nomination, and passing on corporate benefits such as bonus and rights to the account.
Thus the DP is like a bank branch for securities, and the depository is like the bank.
