Merits and Demerits of Direct and Indirect account methods

1
Merits and Demerits of Direct and Indirect
account methods

• Presentation by
• National Securities Depository Limited (NSDL),
• INDIA

2
Direct vs. Indirect Account Method

• Direct Account
• Participant Account
• Beneficiary Account

• Indirect Account
• Participant Account

3
Legal Framework

• Depositories Act 1996
• Dematerialization of securities
• Option to hold securities in dematerialized/physic
  al form
• Depositories to maintain accounts at Clients
  level as well as at Participants level
• Beneficial ownership remains with the Client
• Corporate decisions in terms of voting etc.,
  exercised by the Clients directly

4
Challenges of Direct Account Method

• Large IT infrastructure requirement
• -Processing of large number of
• instructions
• -Large database
• -Demand for a higher bandwidth
• Reconciliation
• -Participant Level
• -Beneficiary Level
• Backoffice Reconciliation for participants

5
Benefits of Direct Account method

• Ability to provide the shareholder information to
  the issuers
• Efficient distribution of corporate benefits
• Investors can verify their account information
  from the depository
• Ease in implementation of STP
• Ease in implementation of statutory requirements
• More Safety for investors

6

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