Question

Justify the following statement.

DP is an important constituent of Depository system.

Answer 1

1. Depository Participant (DP) is the agent of depository. It is an intermediary appointed by depository.
2. DP is registered under the SEBI Act. It enjoys rights and obligations as specified under SEBI (Depository and Participants) Regulations of 1996.
3. DP acts as a link between depository and the investor.
4. It directly deals with customers. It sends statement of accounts periodically.
5. It functions like a securities bank. The DP maintains account of securities of each investor.
6. It facilitates dematerialisation. It settles trade electronically.
7. It credits securities in the event of rights issue, bonus issue, etc. It handles instant transfers of pay-outs like dividend, interest, etc.
8. Thus, DP is an important constituent of depository system.