NISM Series VI Depository Operations – Part 7: Foreign Portfolio Investors (FPI), BSDA, SCORES, IEPF & Complete Exam Revision

Quick Summary: Part 7 (Final) of our NISM Series VI short notes series covers Foreign Portfolio Investors (FPI) and their registration process, the Basic Services Demat Account (BSDA), the SEBI SCORES complaint platform, and the transfer of unclaimed shares to the IEPF Authority. This post also includes a comprehensive revision summary for the entire NISM Series VI Depository Operations Certification Exam.

Foreign Portfolio Investors (FPI) in India's Depository System

The FPI regime provides a single investment route that consolidates different categories of foreign investors — Foreign Institutional Investors (FIIs), Sub Accounts, and Qualified Foreign Investors (QFIs) — under one unified class called the Foreign Portfolio Investor (FPI).

Registration of FPIs

Designated Depository Participants (DDPs) register FPIs and carry out the required due diligence process.
DDPs issue the registration certificate to the FPI on behalf of SEBI (the Board).
No person can buy, sell, or otherwise deal in Indian securities as a foreign portfolio investor without obtaining a certificate from the designated DP.
Each FPI must engage a DDP before making any investment in the Indian securities market.
At all times, the DDP and the Custodian of Securities of the FPI must be the same entity.

Categories of Foreign Portfolio Investors Category I FPI

Includes government and government-related investors such as:

Central Banks
Governmental agencies
Sovereign Wealth Funds
International or multilateral organisations or agencies

Category II FPI

Includes appropriately regulated entities such as:

Mutual funds and investment trusts
Insurance and reinsurance companies
Banks, asset management companies, investment managers, advisors, portfolio managers
Broad-based funds that are not regulated but whose investment manager is appropriately regulated (the investment manager must be registered as Category II FPI)

Category III FPI

Includes all other FPIs not eligible under Category I or II, such as:

Endowments
Charitable societies and trusts
Foundations
Corporate bodies
Trusts, individuals, and family offices

Basic Services Demat Account (BSDA)

The Basic Services Demat Account (BSDA) was introduced by SEBI with the objective of promoting wider financial inclusion, encouraging more investors to hold demat accounts, and reducing the cost of maintaining securities in demat form for retail individual investors.

All Depository Participants (DPs) are required to offer the BSDA with limited services.

Services Offered Under BSDA:

Transaction Statements
Holding Statement
Charged Physical Statements
SMS Alert Facility
Delivery Instruction Slip (DIS)

Note: The BSDA is designed specifically for retail individual investors to reduce the cost of holding securities in demat form. It comes with limited services compared to a regular demat account.

SEBI Complaints Redress System (SCORES)

SCORES (SEBI Complaints Redress System) is a web-based, centralised platform for investors to lodge and track complaints against listed companies and SEBI-registered intermediaries.

Key Features of SCORES:

Available 24x7 online
Introduced on June 8, 2011
Facilitates speedy redressal of investor grievances
SEBI encourages investors to lodge complaints through the electronic mode
Physical complaints received by SEBI are digitised and uploaded to SCORES
All follow-up actions are done electronically through SCORES
Investors can access, retrieve, and preserve their complaint records

How to Use SCORES – Recommended Approach:

First, the investor should approach the concerned listed company or registered intermediary directly with all necessary details to resolve the complaint.
If the entity fails to resolve the complaint to the investor's satisfaction, the investor may then file a complaint on SCORES.

This approach is more time-efficient and is encouraged by SEBI, as direct resolution at the first instance is faster.

Transfer of Shares to the Demat Account of IEPF Authority

Under Section 124(6) of the Companies Act, 2013 and the rules notified thereunder:

Shares on which dividend has not been paid or claimed for 7 consecutive years or more must be transferred by the company to the Investor Education and Protection Fund (IEPF) Authority.
This rule applies to shares held in both dematerialised form and physical form.
Transfer to IEPF is done through a corporate action by the company, into the demat account of the IEPF Authority.
The company must also furnish a statement of shares not transferred to the IEPF (Form No. IEPF-3), which includes an order from a court, tribunal, or statutory authority specifying the date of the order (where applicable).

Master Revision Summary – NISM Series VI Depository Operations

Use this comprehensive revision summary before your NISM Series VI exam. All important facts, rules, and figures are included.

Part 1 – Capital Market & Depository System

Capital Market = Primary Market + Secondary Market
Four key legislations: SEBI Act 1992, SCRA 1956, Depositories Act 1996, Companies Act 2013
Depositories Act, 1996 = passed to solve problems of physical settlement (bad deliveries, fraud, delays)
Depository minimum net worth = Rs. 100 crore
Sponsor must hold at least 51% equity; stock exchange sponsor ≤ 24%; single DP ≤ 15%
Records to be maintained for minimum 5 years
Depository can operate only after SEBI registration
India has two depositories: NSDL and CDSL
ISIN = 12 characters (2-letter country code + 9 alphanumeric + 1 check digit)
IN = India's country code in ISIN

Part 2 – Depository Participant

DP = Agent of the depository; must register with SEBI
Stockbroker DP: client securities ≤ 100 times net worth of stockbroker
DP registration valid until suspended or cancelled by SEBI
DP must provide Rights & Obligations document to client before acting
Daily reconciliation with depository is mandatory for DPs
DPs must maintain records for minimum 5 years
DP voluntary termination: minimum 30 days notice
Depository must notify SEBI and others within 7 days of DP termination
RT&A must confirm/reject demat request within 15 days
CAS = Consolidated Account Statement – single view of all investments

Part 3 – Account Opening

Demat account: maximum 3 holders
Partnership firms cannot open demat accounts
Minors can open demat accounts only through a guardian
NSDL: 16-digit account number (8-digit DP-ID starting with IN + 8-digit client ID)
CDSL: 8-digit DP-ID + 8-digit client account number
Demat account closure only when balance = zero
KYC records to be filed with Central KYC Registry within 3 days of account opening
Demat account can be operated by a Power of Attorney (PoA) holder
Freeze for debits only = client can still receive securities
Account freezing: DP must immediately inform the client of status change
FATCA IGA with USA came into force on 31 August 2015

Part 4 – Dematerialisation, Rematerialisation & Transmission

DRF = Dematerialisation Request Form; DRN = Dematerialisation Request Number
Certificates must be defaced and mutilated before sending to Issuer / RT&A
RT&A must confirm/reject within 15 days of receiving physical shares
Rematerialisation = converting electronic securities back to physical; uses RRF
Transposition cum Demat: change order of joint holders' names + demat simultaneously
Transmission = devolution of title due to death, lunacy, bankruptcy, winding-up
Encumbered securities stay in the deceased's account until encumbrance is removed
Maximum 3 nominees allowed in a demat account
Destatementisation = SoA to demat (MF units, specific to CDSL)
Restatementisation = demat to SoA for MF units

Part 5 – Trading, Settlement, Pledge & Hypothecation

Off-market trade: No CC/CM involvement; direct BO-to-BO transfer
Market trade: Settled through CC/CH; broker uses CM account
Pay-in: Broker submits sold securities to CC/CH
Pay-out: CC/CH delivers purchased securities to broker's CM account
Inter-depository transfer: Transfer between NSDL and CDSL accounts
Early pay-in: Used for margin exemption, buyback, tender offer
Auto pay-in: Only for BSE-CMs
Pledge: Both pledgor and pledgee must be with the same depository
Inter-depository pledge is NOT permitted
Corporate benefits (dividends, bonus) → pledgor (borrower), not the pledgee
Pledgee can close pledge unilaterally; pledgor's confirmation not required
Invocation Request Form (IRF) = used by pledgee to invoke pledge
NDU = Non-Disposal Undertaking (negative lien on securities)

Part 6 – Corporate Actions, Public Issues, Debt & G-Secs

Record Date = cut-off date to determine eligible BOs for corporate benefits
Merger/amalgamation: old ISIN auto-debited; new ISIN auto-credited
Public issues ≥ Rs. 10 crore → compulsory demat
Equity allotment in public issues is mandatory in demat form
IPO process: Investor applies → Issuer/RTA verifies BO ID with depository → Depository credits securities → Issuer sends allotment intimation
Tender offers include buyback, takeover, and delisting
CD minimum transaction = Rs. 1 lakh; redemption DIS by 3:00 PM at least 2 working days before maturity
CP minimum face value = Rs. 5,00,000
Dated G-Secs: maturity > 1 year; T-Bills: maturity ≤ 1 year
Depository acts as RT&A for G-Secs; distributes interest after RBI credit
SGL accounts = G-Sec accounts maintained by depositories through DPs

Part 7 – FPI, BSDA, SCORES & IEPF

FPI = Foreign Portfolio Investor; registered by DDPs on behalf of SEBI
DDP and Custodian of Securities of FPI must be the same entity
Category I FPI: Governments, Central Banks, Sovereign Wealth Funds
Category II FPI: Regulated funds, banks, AMCs, insurance companies
Category III FPI: All others (trusts, individuals, family offices, etc.)
BSDA = Basic Services Demat Account; for retail investors; reduced cost
SCORES = SEBI Complaints Redress System; launched June 8, 2011; available 24x7
Approach the entity first; file on SCORES only if unsatisfied
IEPF: Shares with unclaimed dividend for 7 consecutive years must be transferred to IEPF Authority

High-Priority Exam Topics – What to Focus On

Numbers to remember: 100 crore (net worth), 51% (sponsor equity), 24% (stock exchange limit), 15% (single DP limit), 5 years (record keeping), 15 days (RT&A confirmation), 30 days (DP termination notice), 7 days (depository notification), 3 days (KYC filing), 3 holders (max demat holders), 3 nominees (max nominations), 7 years (IEPF trigger), Rs. 10 crore (compulsory demat in public issues), Rs. 1 lakh (CD min transaction), Rs. 5 lakh (CP face value)
Pledge: same depository; inter-depository pledge NOT allowed
Clearing Member Account: used by brokers/custodians for settlement
Partnership firm: CANNOT open demat account
Minor: can open demat account ONLY through guardian
NSDL account starts with IN (country code in ISIN)
Transmission ≠ Transfer; transmission happens due to death/lunacy/bankruptcy

NISM Series VI Exam Pattern (For Reference)

Total Questions: 100 multiple choice questions
Total Marks: 100
Passing Marks: 50 (50%)
Duration: 2 hours
Negative Marking: 25% per wrong answer
Validity: 3 years from the date of passing

That completes all 7 parts of the NISM Series VI Depository Operations short notes series on passnism.in. All the best for your exam!

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