SEBI issues Master Circular for Depositories

Securities and Exchange Board of India (SEBI) has been issuing various circulars/directions from time to time. In order to enable the users to have an access to all the applicable circulars/directions at one place, Master Circular for Depositories has been prepared.

This Master Circular is a compilation of the circulars/communications issued by SEBI up to March 31, 2013 and shall come into force from the date of its issue.

This Master Circular shall supersede previous Master Circular MRD/DP/10/2012, dated April 13, 2012.

Section 1 : Beneficial Owner (BO) Accounts

1.1 Opening of BO Account by non body corporates

1.1.1 Proof of Identity (PoI)

i. Permanent Account Number (PAN) to be the sole identification number for all transactions in the securities market¹

With effect from July 02, 2007, PAN is the sole identification number for all transactions in the securities market, irrespective of the amount of transaction. A copy of the PAN card with photograph may be accepted as Proof of Identity. In this regard, intermediaries shall:-

 a.  Put necessary systems in place so that the databases of the clients and their transactions are linked to the PAN details of the client.

 b.  Build necessary infrastructure to enable accessibility and query based on PAN thereby enabling retrieval of all the details of the clients.

 c.  Collect copies of PAN cards issued to the existing as well as new clients by the Income Tax Department and maintain the same in their record after verifying with the original.

 d.  Cross-check the aforesaid details collected from their clients with the details on the website of the Income Tax Department i.e. http://incometaxindiaefiling.gov.in/challan/enterpanforchallan.jsp².

List of documents admissible as Proof of Identity³

 a.  Unique Identification Number (UID) (Aadhaar)/Passport/Voter ID card/Driving license.

 b.  PAN card with photograph.

 c.  Identity card/document with applicant's Photo, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members; and Credit cards/Debit cards issued by Banks.

1.1.2 Proof of Address (PoA)⁴

List of documents admissible as Proof of Address:

(*Documents having an expiry date should be valid on the date of submission.)

 a.  Passport/Voters Identity Card/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.

 b.  Utility bills like Telephone Bill (only land line), Electricity bill or Gas bill - Not more than 3 months old.

 c.  Bank Account Statement/Passbook -- Not more than 3 months old.

 d.  Self-declaration by High Court and Supreme Court judges, giving the new address in respect of their own accounts.

 e.  Proof of address issued by any of the following: Bank Managers of Scheduled Commercial Banks/Scheduled Co-Operative Bank/Multinational Foreign Banks/Gazetted Officer/Notary public/Elected representatives to the Legislative Assembly/Parliament/Documents issued by any Govt. or Statutory Authority.

 f.  Identity card/document with address, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities and Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members.

 g.  For FII/sub account, Power of Attorney given by FII/sub-account to the Custodians (which are duly notarized and/or apostiled or consularised) that gives the registered address should be taken.

 h.  The proof of address in the name of the spouse may be accepted.

  i. Aadhaar Letter issued by UIDAI shall be admissible as Proof of Address in addition to its presently being recognized as Proof of Identity.⁵

DP shall ensure that all documents pertaining to proof of identity and proof of address are collected from all the account holders.⁶ Submission of the aforesaid documents is the minimum requirement for opening a BO Account. DPs must verify the copy of the aforementioned documents with the original before accepting the same as valid. While opening a BO Account, DPs shall exercise due diligence⁷ while establishing the identity of the person to ensure the safety and integrity of the depository system.

1.1.3 Acceptance of third party address as correspondence address⁸

   i.  SEBI has no objection to a BO authorizing the capture of an address of a third party as a correspondence address, provided that the Depository Participant (DP) ensures that all prescribed 'Know Your Client' norms are fulfilled for the third party also. The DP shall obtain proof of identity and proof of address for the third party. The DP shall also ensure that customer due diligence norms as specified in Rule 9 of Prevention of Money Laundering Rules, 2005 are complied with in respect of the third party.

 ii.  The depository participant should further ensure that the statement of transactions and holding are sent to the BO's permanent address at least once in a year.

iii.  However, the above provision shall not apply in case of PMS (Portfolio Management Services) clients.

1.2 Exemptions from and clarifications relating to mandatory requirement of PAN

1.2.1 Mandatory requirement of Permanent Account Number (PAN)⁹

The demat accounts for which PAN details have not been verified are "suspended for debit" until the same is verified with the Depository Participant (DP). With effect from August 16, 2010 such PAN non-compliant demat accounts were also "suspended for credit" other than the credits arising out of automatic corporate actions. It was clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions would not be allowed into such accounts.

1.2.2 Central and State Government and officials appointed by Courts¹⁰

PAN card may not be insisted upon in case of transactions undertaken on behalf of Central Government and/or State Government and where transactions are conducted by officials appointed by Courts e.g. Official liquidator, Court receiver etc.¹¹

However DPs, before implementing the above exemption, shall verify the veracity of the claim of the organizations by collecting sufficient documentary evidence in support of their claim for such an exemption.

1.2.3 Investors in Sikkim¹²

Investors residing in the state of Sikkim are exempted from the mandatory requirement of furnishing PAN card details for their demat accounts.¹³ DPs shall verify the veracity of the claim of the investors that they are residents of Sikkim, by collecting sufficient documentary evidence in support of their address.¹⁴

1.2.4 UN entities and multilateral agencies exempt from paying taxes/filling tax returns in India¹⁵

UN entities/multilateral agencies exempt from paying taxes/filing tax returns in India are also exempt from the mandatory requirement of submitting their PAN card details, subject to the DPs collecting documentary evidence in support of such claims.

1.2.5 FIIs/Institutional Clients¹⁶

Custodians shall verify the PAN card details of institutional clients with the original PAN card and provide duly certified copies of such verified PAN details to the brokers. This requirement is applicable in respect of institutional clients, namely, FIIs, MFs, VCFs, FVCIs, Scheduled Commercial Banks, Multilateral and Bilateral Development Financial Institutions, State Industrial Development Corporations, Insurance Companies registered with IRDA and Public Financial Institution as defined under section 4A of the Companies Act, 1956.

1.2.6 HUF, Association of Persons (AoP), Partnership Firm, unregistered Trust, Registered Trust, Corporate Bodies, minors, etc.¹²

The BO account shall be in the name of natural persons, PAN card details of the respective HUF, AoP, Partnership Firm, Unregistered Trust, etc shall be obtained. The PAN number of Registered Trust, Corporate Bodies and minors shall be obtained when accounts are opened in their respective names.

1.2.7 Difference in maiden name and current name of investors.¹²

DPs can collect the PAN card proof as submitted by the account holder subject to the DPs verifying the veracity of the claim of such investors by collecting sufficient documentary evidence in support of the identity of the investors.¹⁷

1.2.8 NRI/PIOs¹⁸

Citizens of India residing outside India, foreign citizens and other persons (like companies/trusts/firms) having no office of their own in India may obtain PAN card based on the copy of their passport as ID proof and a copy of passport/bank account in the country of residence as address proof, based on the Directorate of Income Tax (Systems) guidelines.¹⁹

1.3 Change of Name in the Beneficial Owner (BO) Account²⁰

1.3.1 In order to simplify the procedure of change of name in individual Beneficial Owner's (BO) account, it has been decided that an individual BO may be allowed to change his/her name, subject to the submission of following documents at the time of change of name of the individual in the BO account.

  i.  In case of change in name on account of marriage following documents shall be submitted:

  a.  Marriage Certificate or copy of Passport showing husband's name or publication of name change in official gazette.

 ii.  In case of change in name on account of reasons other than marriage

  a.  Publication of name change in official gazette.

iii.  In case of change in father's name

  a.  Publication of name change in official gazette.

1.3.2 The Depository Participants (DPs) shall collect the self attested copies of above documents and maintain the same in their records after verifying with the original document.

1.4 Fees/Charges to be paid by BO

1.4.1 Account opening, custody and credit of securities²¹

With effect from February 1, 2005

  i.  No investor shall pay any charge towards opening of a Beneficial Owner (BO) Account except for statutory charges as applicable;

 ii.  No investor shall pay any charge for credit of securities into his/her BO account; and

iii.  No custody charge shall be levied on any investor who is opening a BO account.

1.4.2 Account Closure²²

No Account closure charges shall be levied on BO on the closure of any account.

1.4.3 Inter Depository Transfer²³

Inter-depository transfer of shares does not attract Stamp duty and it does not require compliance with section 108 of the Companies Act 1956.

1.4.4 Transfer of a BO Account²⁴

With effect from January 09, 2006

No charges shall be levied by a depository on any DP and by a DP on any BO when the BO transfers all the securities lying in his account to another branch of the same DP or to another DP under the same depository or another depository, provided the BO Account(s) at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.

1.4.5 Account Maintenance Charges collected upfront on annual/half yearly basis on demat accounts²⁵

  i.  In the event of closing of the demat account or shifting of the demat account from one DP to another, the AMC collected upfront on annual/half yearly basis by the DP, shall be refunded by the DP to the BO for the balance of the quarter/s. For instance, in case annual AMC has been paid by the BO and if the BO closes/shifts his account in the first quarter, he shall be refunded the amount of the balance 3 quarters i.e. 3/4th of the AMC. Likewise, if a BO closes/shifts his account in the third quarter, he shall be refunded the amount for the balance one quarter i.e. 1/4th of the AMC.

 ii.  For the purpose of the above requirement the year shall begin from the date of opening of the account in quarterly rests.

iii.  The above requirements shall be applicable to all existing and new accounts held with DPs which collect annual/half yearly upfront AMC. It is clarified that the above requirements shall not be applicable to those DPs who collect quarterly/monthly AMC.

1.4.6 Dissemination of tariff/charge structure of DPs on the website of depositories ²⁶

  i.  DPs shall submit to their depository the tariff/charge structure every year, latest by 30th April, and also inform the depository the changes in their tariff/charge structure as and when they are effected with a view to enabling the BOs to have a comparative analysis of the tariff/charge structure of various DPs.

 ii.  For this purpose depositories shall put in place necessary systems and procedures including formats, periodicity, etc. for collection of necessary data from the DPs and dissemination of the same on their website which would enable the investors to have a comparative analysis of the tariff/charge structure of various DPs.

1.5 Transfer of funds and securities from Clearing Member pool account to BO Account²⁷

  i.  Clearing members shall transfer the funds and securities from their respective pool account to the respective beneficiary account of their clients within 1 working day after the pay-out day. The securities lying in the pool account beyond the stipulated period shall attract a penalty at the rate of 6 basis point per week on the value of securities. The penalty so collected by the depositories shall be credited to a separate account with the depository and earmarked for defraying the expenses in connection with the investors' education and awareness programs conducted by the depository.

 ii.  The securities lying in the pool account beyond the above period shall not be eligible either for delivery in the subsequent settlement(s) or for pledging or stock lending purpose, until the same are credited to the beneficiary accounts.

iii.  The securities lying in the Clearing member's pool account beyond the specified time period shall be identified based on the settlement number. The clearing corporation/houses of the stock exchanges shall provide the settlement-wise details of securities to the depositories and the depositories shall maintain the settlement-wise records for the purpose.

iv.  Further, stock exchanges shall execute direct delivery of securities to the investors. Clearing corporation/clearing house (CC/CH) shall ascertain from each clearing member, the beneficial account details of their respective clients due to receive pay out of securities. Based on this, the CC/CH shall send pay out instructions to the depositories so that the client receives pay out of securities directly to the extent of instructions received from the respective clearing members. To the extent of instruction not received, the securities shall be credited to the CM pool account.

1.6 Printing of Grievances Redressal Mechanism on Delivery Instruction Form Book²⁸

To promote investor awareness regarding mechanism for redressing investor grievances, the information placed below shall be printed on the inside back cover of the Delivery Instruction Form (DIF) Book issued by all Depository Participants.

1.7 Exemption to DPs from giving hard copies of transaction statements to BOs²⁹

DPs are permitted to provide transaction statements and other documents to the BOs under Digital signature, as governed under the Information Technology Act, 2000, subject to the DP entering into a legally enforceable arrangement with the BO for the said purpose. While such practice in the aforesaid manner shall be deemed to be in compliance of the provisions of the Regulation 43 of SEBI (Depositories & Participants) Regulations, 1996; if the BO is still desirous of receiving statements in hard copy, DPs shall be duty bound to provide the same.

1.8 Safeguards to address the concerns of the investors on transfer of securities in dematerialized mode³⁰

Following safeguards shall be put in place to address the concerns of the investors arising out of transfer of securities from the BO Accounts:

  i.  The depositories shall give more emphasis on investor education particularly with regard to careful preservation of Delivery Instruction Slip (DIS) by the BOs. The Depositories may advise the BOs not to leave "blank or signed" DIS with the Depository Participants (DPs) or any other person/entity.

 ii.  The DPs shall not accept pre-signed DIS with blank columns from the BO(s).

iii.  If the DIS booklet is lost/stolen/not traceable by the BO, then the BO shall immediately intimate the DP in writing about the loss. On receipt of such intimation, the DP shall cancel the unused DIS of the said booklet.

iv.  The DPs shall not issue more than 10 loose DIS to one accountholder in a financial year (April to March). The loose DIS can be issued only if the BO(s) come in person and sign the loose DIS in the presence of an authorised DP official

 v.  The DP shall also ensure that a new DIS booklet is issued only on the strength of the DIS instruction request slip (contained in the previous booklet) duly complete in all respects, unless the request for fresh booklet is due to loss, etc., as referred to in clause (c) above

vi.  The DPs shall put in place appropriate checks and balances with regard to verification of signatures of the BOs while processing the DIS.

vii.  The DPs shall cross check with the BOs under exceptional circumstances before acting upon the DIS.

viii.  The DPs shall mandatorily verify with a BO before acting upon the DIS, in case of an account which remained inactive i.e., where no debit transaction had taken place for a continuous period of 6 months, whenever all the ISIN balances in that account (irrespective of the number of ISINs) are transferred at a time. However, in case of active accounts, such verification may be made mandatory only if the BO account has 5 or more ISINs and all such ISIN balances are transferred at a time. The authorized official of the DP verifying such transactions with the BO, shall record the details of the process, date, time, etc., of the verification on the instruction slip under his signature.

Section 2: Issuer Related

2.1 Charges paid by Issuers^31,32

  i.  With effect from April 27, 2011 depositories may levy and collect the charges towards custody from the issuers, on the basis of average no. of folios (ISIN position) during the previous financial year, as per the details given below:

 ii.  Issuers to pay @ Rs.8.00 (*) per folio (ISIN position) in the respective depositories, subject to a minimum as mentioned below:

*Plus service tax as applicable

iii.  The average no. of folios (ISIN positions) for an Issuer may be arrived at by dividing the total number of folios for the entire financial year by the total number of working days in the said financial year.

iv.  If the issuer fails to make the payment, Depositories may charge penal interest subject to a maximum of 12% per annum.

2.2 Activation of ISIN in case of IPO and additional issue of shares/securities

  i.  Depositories shall activate the ISINs only on the date of commencement of trading on the stock exchanges in case of IPOs for both the equity and debt securities.³³

 ii.  Further, in order to curtail the transfer of additional issue of shares/securities including by way of further public offerings, rights issue, preferential allotment, bonus issue etc of the listed company, prior to receipt of final listing/trading approval, the depositories shall devise a mechanism so that such new securities created shall be frozen till the time final listing/trading permission is granted by the exchange.³⁴

iii.  In order to achieve the above, the Depositories are advised to allot such additional shares/securities under a new temporary ISIN which shall be kept frozen. Upon receipt of the final listing/trading permission from the exchange for such additional shares/securities, the shares/securities credited in the new temporary ISIN shall be debited and the same would get credited in the preexisting ISIN for the said security. Thereafter, the additional securities shall be available for trading.

iv.  The stock exchanges are advised to provide the details to the depositories whenever final listing/trading permission is given to securities. Further, in case of issuance of equity shares by a company, listed on multiple stock exchanges, the concerned stock exchanges shall synchronize their effective dates of listing/trading approvals and intimate the same to depositories in advance.³⁴

2.3 Registrar and Share Transfer Agent

2.3.1 Appointment of a single agency for share registry work³⁵

All work related to share registry pertaining in terms of both physical and electronic shares shall be maintained at a single point i.e. either in-house by the company or by a SEBI registered Registrar and Transfer Agent.

2.3.2 Inter-Depository transfers³⁶

In case of inter-Depository transfers of securities, the Registrars shall communicate the confirmation of such transfers within two hours, failing which such transfers shall be deemed to have been confirmed. The Registrars shall not reject inter-Depository transfers except where

  i.  A Depository does not have adequate balance of securities in its account or

 ii.  there is mismatch of transfer requests from the Depositories.

2.3.2 Common Registrars and Share Transfer agents³⁷

Every company shall appoint the same Registrars and Share Transfer agents for both the depositories.

2.3.3 Dematerialisation requests^37,72

Registrars and Share Transfer agents shall accept partial dematerialisation requests and will not reject or return the entire dematerialization request where only a part of the request had to be rejected. In cases where a DP has already sent information about dematerialisation electronically to a Registrar but physical shares have not yet been delivered, the Registrar shall accept the demat request and carry out dematerialization on an indemnity given by the DP and proof of dispatch of document given by DP.

2.4 Mandatory admission of debt instruments on both the Depositories³⁸

Debt instruments shall necessarily be admitted on both the Depositories.

2.5 American Depository Receipts (ADRs)/Global Depository Receipts (GDRs)

2.5.1 Delivery of underlying shares of GDRs/ADRs in dematerialised form³⁹

Underlying shares of GDRs/ADRs shall be compulsorily delivered in dematerialised form. Pursuant to RBI directions in this regard, a non-resident holder of ADRs/GDRs issued by a company registered in India, on surrender of such ADRs/GDRs, can acquire the underlying shares when such shares are released by the Indian Custodian of the ADR/GDR issue. Further, the company whose shares are so released, or a Depository shall enter in the register or books, wherein such securities are registered or inscribed, an address outside India of the non-resident holder of shares.

2.5.2 Tracking of underlying shares of GDRs/ADRs⁴⁰

To ensure easy tracking of the underlying shares released on conversion of the "depositories receipts" all such shares shall be credited to a separate Depository Receipts (DRs) account of the respective investor. In this regard, Depositories shall ensure that the following information is provided to the domestic custodian holding the underlying shares on a regular basis:

  i.  Total number of shares at the beginning of the month

 ii.  Number of shares transferred into the account (credited) during the month

iii.  Number of shares transferred out of the account (debited) during the month.

iv.  Balance at the end of the month.

This service can be availed of only by foreign investors other than the OCBs.

2.6 Electronic Clearing System (ECS) facility

2.6.1 Use of ECS for refund in public/rights issues.^41&67

For locations where facility of refund through ECS is available details of applicants shall be taken directly from the database of the depositories in respect of issues made completely in dematerialised form. Accordingly, DPs shall maintain and update on real time basis the MICR (Magnetic Ink Character Recognition) code of Bank branch of BOs and other bank details of the applicants in the database of depositories. This is to ensure that the refunds through ECS are made in a smooth manner and that there are no failed/wrong credits.

2.6.2 Usage of electronic payment modes for making cash payments to the investors⁴²

  i.  For making cash payments to the investors, companies whose securities are listed on the stock exchanges shall use, either directly or through their Registrars to an Issue and Share Transfer Agent (RTI & STA), any RBI (Reserve Bank of India) approved electronic mode of payment such as Electronic Clearing Services (ECS) [LECS (Local ECS)/RECS (Regional ECS)/NECS (National ECS)], National Electronic Fund Transfer (NEFT), etc.

 ii.  In order to enable usage of electronic payment instruments, companies whose securities are listed on the stock exchanges (or their RTI & STA) shall maintain requisite bank details of their investors -

  a.  For investors that hold securities in demat mode, companies or their RTI & STA shall seek relevant bank details from the depositories. To this end, vide circular SEBI/MRD/DEP/Cir-3/06 dated February 21, 2006 and letter MRD/DEP/PP/123624/2008 dated April 23, 2008, depositories have been advised to ensure that correct account particulars of investors are available in the database of depositories.

  b.  For investors that hold physical share/debenture certificates, companies or their RTI & STA shall take necessary steps to maintain updated bank details of the investors at its end.

iii.  In cases where either the bank details such as MICR (Magnetic Ink Character Recognition), IFSC (Indian Financial System Code), etc. that are required for making electronic payment are not available or the electronic payment instructions have failed or have been rejected by the bank, companies or their RTI & STA may use physical payment instruments for making cash payments to the investors. Companies shall mandatorily print the bank account details of the investors on such payment instruments.

iv.  Depositories are directed to provide to companies (or to their RTI & STA) updated bank details of their investors.

Section-3 : Depositories/Depository Participant (DP) Related

3.1 Facility for a Basic Services Demat Account (BSDA)⁴³

3.1.1 All depository participants (DPs) shall make available a "Basic Services Demat Account" (BSDA) with limited services as per terms specified herein.

3.1.2 Eligibility: Individuals shall be eligible to opt for BSDA subject to the following conditions-

  i.  All the individuals who have or propose to have only one demat account where they are the sole or first holder.

 ii.  Individuals having any other demat account/s where they are not the first holder shall be eligible for BSDA in respect of the single demat account where they are sole or first holder.

iii.  The individual shall have only one BSDA in his/her name across all depositories.

iv.  Value of securities held in the demat account shall not exceed Rupees Two Lakhs at any point of time.

3.1.3 Option to open BSDA: The DP shall give option:

  i.  To open BSDA to all eligible individuals who open a demat account after the date of applicability of this circular;

 ii.  To all the existing eligible individuals to convert their demat account into BSDA on the date of the next billing cycle based on value of holding of securities in the account as on the last day of previous billing cycle.

3.1.4 Charges:

  i.  The charge structure may be on a slab basis as indicated below:

a. No Annual Maintenance Charges (AMC) shall be levied, if the value of holding is upto Rs. 50,000.

b. For the value of holding from Rs. 50,001 to Rs 200,000, AMC not exceeding Rs 100 may be charged.

 ii.  The value of holding shall be determined by the DPs on the basis of the daily closing price or NAV of the securities or units of mutual funds, as the case may be. Where such price is not available the last traded price may be taken into account and for unlisted securities other than units of mutual funds, face value may be taken in to account.

iii.  If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non BSDA) from that date onwards.

iv.  The DPs shall reassess the eligibility of the BOs at the end of every billing cycle and give option to the BOs who are eligible to opt for BSDA.

3.1.5 Services for Basic Services Demat Accounts:

i. Transaction statements:

a. Transaction statements shall be sent to the BO at the end of each quarter. If there are no transactions in any quarter, no transaction statement may be sent for that quarter.

b. If there are no transactions and no security balance in an account, then no further transaction statement needs to be provided.

c. Transaction statement shall be required to be provided for the quarter in which the account became a zero balance account.

ii. Holding Statement:

a. One annual physical statement of holding shall be sent to the stated address of the BO in respect of accounts with no transaction and nil balance.

b. One annual statement of holding shall be sent in respect of remaining accounts in physical or electronic form as opted for by the BO.

iii. Charges for statements: Electronic statements shall be provided free of cost. In case of physical statements, the DP shall provide at least two statements free of cost during the billing cycle. Additional physical statement may be charged at a fee not exceeding Rs.25/- per statement.

iv. All BOs opting for the facility of BSDA, shall register their mobile number for availing the SMS alert facility for debit transactions.

 v.  At least Two Delivery Instruction Slips (DIS) shall be issued at the time of account opening.

vi.  All other conditions as applicable to regular demat accounts, other than the ones mentioned in this circular shall continue to apply to basic services demat account.

3.1.6 Rationalisation of services with respect to regular accounts.

In partial modification of the earlier directions, the following rationalisation measures shall be available for regular demat accounts:

 a.  Accounts with zero balance and nil transactions during the year: The DPs shall send one physical statement of holding annually to such BOs and shall resume sending the transaction statement as and when there is a transaction in the account.

 b.  Accounts which become zero balance during the year: For such accounts, no transaction statement may be sent for the duration when the balance remains nil. However, an annual statement of holding shall be sent to the BO.

 c.  Accounts with credit balance: For accounts with credit balance but no transactions during the year, one statement of holding for the year shall be sent to the BO.

3.2 Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS)⁴⁴

  i.  Vide notification 51/2012 dated November 23, 2012, Department of Revenue, Ministry of Finance (MoF) has notified the Rajiv Gandhi Equity Savings Scheme (RGESS), 2012. The notification is available on the website of Income Tax Department under section "Notifications".

 ii.  With regard to implementation of the MoF notification, the following is clarified:

  a.  For RGESS eligible close-ended Mutual Funds schemes, advice given by AMCs to the depository for extinguishment of units of close ended schemes upon maturity of the scheme shall be considered as settled through depository mechanism and therefore RGESS compliant.

  b.  AMCs shall disclose that the concerned RGESS eligible Exchange Traded Funds and Mutual Fund schemes is in compliance with the provisions of RGESS guidelines notified by Ministry of Finance vide notification no. 51/2012 F. No. 142/35/2012-TPL dated November 23, 2012, in Scheme Information Document (SID), in case of new fund offer, or by way of addendum, in case of existing RGESS eligible Exchange Traded Funds and Mutual Fund schemes.

  c.  Section 6(c) of the notification states that the eligible securities brought into the demat account will automatically be subject to lock-in during the first year, unless the new investor specifies otherwise and for such specifications, the new retail investors shall submit a declaration in Form B indicating that such securities are not to be included within the above limit of investment. It is clarified that such declaration shall be submitted by an investor to its Depository Participant within a period of one month from the date of transaction.

  d.  For transactions undertaken by investors through their RGESS designated demat account, Depositories may seek necessary transactional details from stock exchanges viz. Actual Trade value, Trading date, Settlement number, etc, for the purpose of enforcing lock-in and for generating reports mandated vide MoF notification on RGESS. On receipt of such request from depositories, stock exchanges shall provide the details to depositories on an immediate basis. It shall also be ensured that a uniform file structure is used by stock exchanges and depositories for such intimation of transaction details.

  e.  With regard to point 3(ix) (a) & (b) of RGESS notification, depositories may seek confirmation, as applicable, from stock exchanges.

  f.  With regard to the securities held in the RGESS designated account, treatment of the corporate actions shall be as given at Annexure A.

iii.  Stock exchanges shall furnish list of RGESS eligible stocks/ETFs/MF schemes on their website. Further, the list shall also be forwarded to the depositories at monthly intervals and whenever there is any change in the said list. For this purpose, Mutual Funds/AMCs shall communicate list of RGESS eligible MF schemes/ETFs to the stock exchanges.

Annexure A

Treatment of corporate actions

 (i)  Involuntary corporate actions: In case of corporate actions where investors has no choice in the matter, for example: demerger of companies, etc, the compliance status of RGESS demat account shall not change.

(ii)  Voluntary corporate actions: In case of corporate actions where investors has the option to exercise his choice and thereby result in debit of securities, for example: buy-back, etc, the same shall be considered as a sale transaction for the purpose of the scheme.

Consolidated list of 'corporate actions'

* Considering any conversion into equities (e.g.: Conversion of warrants into equities)

Annexure B - Illustration of lock-in period in RGESS

I. RGESS lock-in period if investments are brought in at once

Annexure B - Illustration of lock-in period in RGESS

I. RGESS lock-in period if investments are brought are in instalment

3.3 Limitation period for filing an arbitration reference⁴⁵

  i.  It is decided that the limitation period for filing an arbitration reference shall be governed by the law of limitation, i.e., The Limitation Act, 1963. The modified limitation period shall also be applicable to cover inter alia the following cases:

  a.  where the limitation period (in terms of Limitation Act 1963) have not yet elapsed and the parties have not filed for arbitration with the depository,

or,

  b.  where the arbitration application was filed but was rejected solely on the ground of delay in filing within the earlier limitation period; and the limitation period (in terms of Limitation Act 1963) have not yet elapsed.

3.4 Designated e-mail ID for redressal of investor complaints⁴⁶

 ii.  Depositories and registered DPs shall designate an exclusive e-mail ID for the grievance redressal division/compliance officer exclusively for registering investor complaints.

iii.  The designated email ID and other relevant details shall be prominently displayed on the websites and in the various materials/pamphlets/advertisement campaigns initiated by the Depositories and DPs for creating investor awareness.

3.5 Redressal of complaints against Stock Exchanges (SEs) and Depositories through SEBI Complaints Redress System (SCORES).⁴⁷

  i.  The complaints received by SEBI against SEs and Depositories shall be electronically sent through SCORES. Depositories are advised to view the pending complaints at http://scores.gov.in/admin and submit the Action Taken Report (ATR) along with supporting documents electronically in SCORES. Updation of action taken shall not be possible with physical ATRs. Hence, submission of physical ATR shall not be accepted for complaints lodged in SCORES.

 ii.  The SEs and Depositories shall do the following:

  a.  indicate a contact person in case of SCORES, who is an employee heading the complaint services division/cell/department. Contact detail (i.e. phone no., email id, postal address) of the said contact person be made widely available for e.g. on the websites of Depositories.

  b.  address/redress the complaints within a period of 15 days upon receipt of complaint on SCORES. In case additional information is required from the complainant, the same shall be sought within 7 days of receipt on SCORES. In such case, the period of 15 days will be counted upon the receipt of additional information.

  c.  maintain a monthly record of the complaints which are not addressed/redressed within 15 days from the date of receipt of the complaint/information, alongwith the reason for such pendency.

  d.  Upload/update the ATR on the SCORES. Failure to do so shall be considered as non-redressal of the complaint and the complaint shall be shown as pending.

3.6 Approval of amendments to Bye Laws/Rules of Stock Exchanges and Depositories⁴⁸

i. Depositories and exchanges shall submit the following information while seeking SEBI approval for amendment to Bye Laws/ Rules/ Regulations and amendments thereto:

  a.  The objective/purpose of amendments.

  b.  Whether the amendment is consequential to any directive/circulars/ guidelines from SEBI/ Government and the details thereof.

  c.  Whether such amendments necessitate any consequential amendments to any other Bye Laws/ Rules/ Regulations.

  d.  The proceedings of the Governing Board or Governing Council, as the case may be, wherein these proposed amendments were approved by the Exchanges/ Depositories.

  e.  If documents other than Bye Laws/ Rules/ Regulations are sent for approval, the justification and need for forwarding the same to SEBI, indicating whether it forms a part of any Bye Law/ Rule/ Regulation.

 ii.  Further, all Exchanges shall ensure that requests for dispensation of the requirement of pre-publication shall be accompanied with proper justification and indicate how the public interest or interest of trade shall be served by such dispensation of pre-publication.

3.7 Preservation of Records⁴⁹

  i.  Depositories and Depository Participants are required to preserve the records and documents for a minimum period of 5 year.

 ii.  Depositories and DPs shall preserve respective original forms of documents either in physical form or an electronic record, copies of which have been taken by CBI, Police or any other enforcement agency during the course of their investigation till the trial is completed.

3.8 Foreign investments in infrastructure companies in securities markets⁵⁰

  i.  Pursuant to Government of India Policy, foreign investments in infrastructure companies in the securities markets, namely Stock Exchanges, Depositories and Clearing Corporations shall be as under:

  a.  Foreign investment shall be allowed in such companies up to 49% with a separate Foreign Direct Investment (FDI) cap of 26% and Foreign Institutional Investment (FII) cap of 23%;

  b.  FDI shall be allowed with specific prior approval of FIPB;

  c.  FII shall be allowed only through purchases in the secondary market;

  d.  FII shall not seek and will not get representation on the Board of Directors;

  e.  No foreign investor, including persons acting in concert, will hold more than 5% of the equity in these companies.

 ii.  The aforesaid limits for foreign investment in respect of recognised Stock Exchanges shall be subject to 5% shareholding limit as prescribed under the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006.

3.9 Activity schedule for depositories for T+2 rolling Settlement⁵¹

  i.

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