PRESENTATION ON CP:203 FINANCIAL MARKET ANALYSIS TOPIC: DEMATERIALIZATION

PRESENTED TO Prof H.R Lashkar Assistance Professor DBA-SMS

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PRESENTED BY Jupitora Borah RollNo29,Sec A Sem 2 nd

Contents:
1. Introduction 2. Dematerialization 3 Features 4 Process 5 Can electronic holdings be converted back into physical certificates? 6 What is the procedure for selling dematerialised securities? 7 Advantage 8 Disadvantage 9 Remedial Measures 10 Conclusion
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INTRODUCTION:
In Economics Dematerialization refers to the absolute or relative reduction in the quantity of materials required to serve economic functions in society. In common terms, dematerialization means doing more with less. In finance and financial law , dematerialization refers to the substitution of paperform securities by book-entry securities.

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DEMATERIALIZATION: Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited into the BOs account with his DP.

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FEATURES
.

Holdings in only those securities that are admitted

for dematerialization by NSDL can be dematerialized.

Only those holdings that are registered in the name of the account holder can be dematerialized. Names of the holders of the securities should match with the names given for the demat account.
. Check the demat performance of the companies whose shares are to be given for dematerialization. 11/26/2013 5

PROCESS:

There is only 6 steps process of DEMATERIALIZATION. They are as follows: I. . Step .1 Shareholder/Investor approaches to a depository participant of his choice and opens an account just like an account with a bank. With the opening of account, shareholder gets an identification number called Clients ID which serves as a reference point for all transactions and correspondence with the depository participant. The shareholder fills up a Dematerialization Request Form (DRF) to be provided by the depository participant and hands it over along with share certificates duly cancelled by writing Surrendered for dematerialization to the depository participant for demat26. The DP will accept certificates registered only in the name that holds the share certificate .
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II. Step2... Upon receipt of DRF along with the original share certificates, the DP sends an electronic request to company through NSDL for conformation of demat and simultaneously surrenders the shareholdings. DRF and share certificates are accompanied by standard letter to the company for demat confirmation.

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CONT. Step3.... 26 Depositories Act, 1996. 9 A Company must be equipped with the requisite hardware/software facility. It must be linked to the NSDL network through a V-Sat connection. Step4.... On receipt of the DRF and share certificates of the shareholder, necessary verification is done and demat is confirmed to NSDL by the registrar. Step5... NSDL further confirms the demat to the shareholders DP. Step6... DP credits the shareholders account with the number of shares so dematerialized and thereafter the shareholder holds the securities in electronic form. DP of the shareholder gives a statement of holdings and updates account after each transaction just like bank account. 11/26/2013 8

Can electronic holdings be converted back into physical certificates?

Yes. The process is called dematerialisation. If one wishes to get back his securities in the physical form he has to fill in the RRF (Remat Request Form) and request his DP for dematerialisation of the balances in his securities account.

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What is the procedure for selling dematerialised securities? The procedure for buying and selling dematerialised securities is similar to the procedure for buying and selling physical securities. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities. In case of purchase: The broker will receive the securities in his account on the payout day. The broker will give instruction to its DP to debit his account and credit BO's account. BO will give Receipt Instruction to DP for receiving credit by filling appropriate form. However BO can give standing instruction for credit to his account that will obviate the need of giving Receipt Instruction every time. In case of sale:BO will give delivery instruction through Delivery Instruction Slip (DIS) to DP to debit his account and credit the brokers account. Such 11/26/2013 should reach the DPs office at least 24 hours before the 10 instruction pay-

Advantages of the Depository System

Share certificates, on dematerialization, are cancelled and the same will not be sent back to the investor. Transfer of dematerialized securities is immediate and unlike in the case of physical transfer where the change of ownership has to be informed to the company in order to be registered The investor is also relieved of problems like bad delivery, fake certificates, shares under litigation, signature difference of transferor and the like There is no need to fill a transfer form for transfer of shares and affix share transfer stamps. There is saving in time and cost on account of elimination of 11/26/2013 11 posting of certificates.

Disadvantages/Problems of the Depository System

Some disadvantages were about the depository system were known beforehand. But since the advantages outweighed the shortcomings of dematerialization, the depository system was given the go-ahead.

Lack of control Need for greater supervision Complexity of the system

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REMEDIAL

MEASURES

* To prevent the sprouting of fictitious demat accounts at DP's the allotment of shares should be checked thoroughly.
* The concerned DP should strictly enforce the Know your client (KYC) norms rather than relying on bank documents and verification of brokers. * DP's should be asked to give monthly figure of accounts opened for the public. * Coordination and Clear definition of roles is important to weed out manipulations.
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CONCLUSION: Dematerialization is the process of converting physical share certificates into electronic form i.e. crediting of equivalent number of shares to your depository account electronically. For dematerialization of shares you have to open a depository account with a Depository Participant (DP) having connectivity with National Securities Depository Ltd (NSDL) / Central Depository Services (I) Ltd (CSDL). You are free to open an account with any of the DPs for demat.

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REFERENCE www.nsdl.co.in / www.cdslindia.com www.indiainfoli ne.com www.wikipedia. com

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