Who Is a Depository Participant?

A depository participant is an agent of the depository through which it interfaces with the investor and provides depository services. A depository is an organization that holds securities like shares, debentures, bonds, government securities, mutual fund units, etc., of investors in an electronic form.

Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India (RBI), state financial corporations, custodians, stockbrokers, clearing corporations/clearing houses, non-banking financial companies (NBFCs), and registrar to an issue or share transfer agent complying with the requirements prescribed by SEBI can be registered as a DP. Just like banking services can be availed through a branch, depository services can be availed through a DP.

As on 30 September 2008, a total of 711 DPs (266 NSDL, 445 CDSL) are registered with SEBI.

Who Is a Sub-Broker?

Sub-broker means any person, not being a member of a stock exchange, who acts on behalf of a member broker (DP) as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such member brokers.

All sub-brokers are required to obtain a certificate of registration from SEBI – without the certificate, they are not permitted to deal in securities. SEBI has directed that no broker shall deal with a person who is acting as a sub-broker unless he is registered with SEBI, and it shall be the responsibility of the member broker to ensure that his clients are not acting in the capacity of a sub-broker unless they are registered with SEBI as a sub-broker.

It is mandatory for member brokers to enter into an agreement with all the sub-brokers. The agreement lays down the rights and responsibilities of member brokers as well as sub-brokers.

Bank

Holds funds in an account. Transfers funds between accounts on the instruction of the accountholder.

Facilitates transfer without having to handle money.

Facilitates safekeeping of money.

Depository

Holds securities in an account. Transfers securities between accounts the instruction of the beneficial owner accountholder.

Facilitates safekeeping of securities.

on (BO) Facilitates transfer of ownership without having to handle securities.