NISM Series IIA Short Notes – Part 6: Depository Processes, Corporate Actions & Investor Interface with R&T Agent

NISM Series IIA Short Notes – Part 6: Depository Processes, Corporate Actions & Investor Interface with R&T Agent

This is Part 6 of our 7-part NISM Series IIA short notes series on PassNISM.in. This part covers two important chapters that carry significant weight in the NISM IIA certification exam:

• Chapter XII – Processes Related to Depositories (Trading, Settlement, Corporate Actions, Reconciliation)
• Chapter XIII – Investor Interface with the R&T Agent (Transfer, Transmission, Duplicate Certificates, Stop Transfers, AGM, E-Voting)

Series Navigation: ← Part 5: Roles in Public Issue & Depository Services | Part 7: Secondary Market & SEBI LODR Regulations → Chapter XII – Processes Related to Depositories Trading and Settlement – Market Trades vs Off-Market Trades

One of the primary functions of a depository is to facilitate the movement of securities triggered by trading activities.

Both types involve the movement of securities from seller to buyer — and therefore the involvement of the Depository.

Inter-Depository Delivery

• If a trade requires transfer of securities between NSDL and CDSL, it is called inter-depository delivery
• Only possible if the security is available for dematerialisation in both depositories
• Instructions must be given using inter-depository delivery or receipt forms to the DPs of the seller and buyer

Corporate Actions – Role of R&T Agent

Apart from the public issue process, the depository, R&T agent, issuer, DP, and investor all coordinate to execute corporate actions.

1. Bonus Issue / Stock Split / Consolidation

• The company informs both the depository and the R&T Agent about the record date
• The depository generates a Beneficial Owner (BO) report as on the record date
• The R&T Agent uses this report to update the BO master and calculate entitlements for each beneficial owner

2. Rights Issue

• For a rights issue, the company must obtain a beneficial owner download from the depository
• Request must specify the ISIN and the book closure period / record date

3. Mergers and Amalgamations

• In a merger or takeover, a scheme of amalgamation is approved which defines the share swap ratio
• Shares of one company are exchanged for shares of the other (transferee) company based on the approved ratio

Reconciliation of Demat and Physical Records

The R&T Agent maintains the Register of Members for physical holdings. The Depository maintains records for electronic holdings. Both records must match at all times.

• Records are reconciled on a daily basis (end-of-day process) to check the integrity of total issued capital
• If physical + demat holdings ≠ total issued capital, it indicates a discrepancy that must be resolved

Chapter XIII – Investor Interface with the R&T Agent

The R&T Agent is the primary service point for investors holding securities in physical form. For dematerialised securities, the Depository Participant (DP) is the contact point.

Common Service Requests Handled by R&T Agents

• Transfer of ownership
• Recording changes in address, bank particulars, or Power of Attorney (POA)
• Issue of duplicate share certificates
• Stop Transfers
• Transmission (on death of shareholder)

Transfer of Securities

Securities may be bought and sold in the stock market or through off-market deals. Any transaction requires a transfer of ownership from the transferor to the transferee.

• For physical securities: the transfer request is submitted to the R&T Agent
• For dematerialised securities: transfer is done through the DP electronically via the depository

Recording Changes in Investor Information Change of Address

• Request must be signed by the first named security holder
• Must be supported by proof of identity

Change of Bank Details

• Request must be signed by the first named holder as per specimen signature on record with the R&T Agent
• Must be supported by an original unsigned cancelled cheque for the new account

Power of Attorney (POA)

• On receipt of POA document, the R&T Agent verifies the security holder's signature and the powers granted to the attorney
• If signature matches, the holder and attorney details are recorded in a register (physical or electronic)

Issue of Duplicate Share Certificates

If a physical share certificate is lost, the holder can apply for a duplicate certificate.

Process

1. Security holder intimates the R&T Agent of the loss
2. R&T Agent marks a 'Stop Transfer' on the lost securities immediately
3. Holder must file a Police Complaint/FIR and furnish proof to the R&T Agent
4. For shares lost in transit (before ownership transfer):
   • If purchased from a stock exchange: Provide contract note and proof of payment
   • If purchased off-market: Original holder must apply for duplicate; new buyer must execute a fresh instrument of transfer
5. R&T Agent verifies documents and sends them to the Issuer Company for approval
6. On approval, a duplicate certificate is issued with the legend:
   "Duplicate certificate issued in lieu of certificate no. ______"

Stop Transfers

• A security holder can request the R&T Agent to mark a "Stop Transfer" for lost securities
• R&T Agent calls for an FIR or acknowledged copy of police complaint
• Stop transfer is also noted when a Court restraining order is received

Transmission of Securities

Transmission refers to the transfer of securities from a deceased holder's name to the surviving holder(s).

Documents Required for Transmission

• Prescribed transmission request form
• Original share certificates
• Certified true copy of the Death Certificate
• Self-attested photocopy of PAN Card(s) of the surviving holder(s)

Transmission Process

1. R&T Agent verifies all documents
2. Records the death in the document registration system with a reference number
3. Deletes the name of the deceased holder
4. Updates the Register of Members
5. Sends certificates to the first surviving holder who now becomes the first security holder

Key Difference: Transfer = voluntary sale/gift of securities. Transmission = legal transfer on death/insolvency, requires no stamp duty and no transfer deed. Annual General Meeting (AGM) – R&T Agent's Role

The R&T Agent assists the listed entity in conducting its AGM, EGM (Extraordinary General Meeting), CCM (Court Convened Meeting), and postal ballots.

Annual Report Distribution

The listed entity must send the annual report at least 21 days before the AGM:

• Soft copy (full annual report) to all shareholders who have registered their email address
• Hard copy of statement containing the salient features (as prescribed under Companies Act, 2013) to others
• Hard copy of full annual report to shareholders who specifically request it

E-Voting

E-Voting is an electronic platform for shareholders to vote on company resolutions without attending meetings in person.

Advantages of E-Voting

• Eliminates paper from the voting process
• Enables sending of notices and ballot papers electronically
• Allows fair and transparent electronic voting on company resolutions
• Enables shareholders to vote at a time and place of their convenience (even from home/office on the last day)
• Eliminates postal delays and reduces chances of votes being declared invalid
• Improves Corporate Governance standards
• Reduces administrative costs associated with postal ballot
• Increases shareholder participation in meetings
• Results are declared immediately after the voting period closes

Quick Revision – Key Numbers to Remember

Internal Links

• ← Part 5: Roles in a Public Issue & Depository Services
• Part 7: Secondary Market Transactions & SEBI LODR →
• Free NISM Series IIA Mock Test
• NISM Study Material – All Series

FAQs What is the difference between Transfer and Transmission of shares?

Transfer is a voluntary process where the owner sells or gifts shares to another person. It requires a transfer deed and stamp duty. Transmission is an involuntary process triggered by the death or insolvency of a shareholder, where securities pass to legal heirs or survivors without stamp duty and without a transfer deed.

What documents are needed for transmission of shares?

You need: (1) prescribed transmission request form, (2) original share certificates, (3) certified true copy of the death certificate, and (4) self-attested photocopy of PAN cards of surviving holder(s).

What is a Stop Transfer in share market?

A Stop Transfer is a flag placed by the R&T Agent on specific securities to prevent their transfer. It is applied when the holder reports loss of certificates or when a court restraining order is received. The holder must also file an FIR with the police.

What is daily reconciliation in depository systems?

Daily reconciliation is the process of matching the R&T Agent's physical Register of Members with the depository's electronic holding records. This ensures that the total physical + demat holdings always equal the company's total issued capital. It is an end-of-day process done every business day.

Continue to Part 7 – Secondary Market Transactions, Stock Markets & SEBI LODR Regulations — the final part of our NISM Series IIA short notes on PassNISM.in.