What Is a Depository Participant (DP)? SEBI Rules

A depository participant is the SEBI registered intermediary that stands between you and a depository. You never hold an account with NSDL or CDSL directly. You hold it with a participant, which acts as the depository's agent, and every instruction, statement and charge reaches you through it. This page sets out what the statute makes a depository participant, who is allowed to become one, and what obligations attach to the role.

What does a depository participant actually do?

Section 4(1) of the Depositories Act is short: a depository shall enter into an agreement with one or more participants as its agent. Section 5 puts the investor on the other side of that chain, saying any person may, through a participant, enter into an agreement with a depository for availing its services. Everything operational follows from that agency.

In practice a participant carries four jobs:

• Account opening and KYC. It opens or activates the demat account only after receiving a complete account opening form and the supporting KYC documents specified by SEBI.
• Executing instructions. It effects transfers to and from the account only on an order, instruction, direction or mandate authorised by the beneficial owner, and keeps the audit trail.
• Processing demat and remat. It forwards a surrendered certificate to the issuer within seven days for dematerialisation, and handles rematerialisation requests the other way.
• Reporting to the holder. It provides statements of account under regulation 60 of the D and P Regulations, in the form, manner and timing agreed with the beneficial owner and as specified by SEBI.

What it does not do is own the record. The register and index of beneficial owners is maintained by the depository under section 11 of the Act, and the beneficial owner holds the rights.

Who is allowed to be a depository participant?

Regulation 35(a) of the SEBI (Depositories and Participants) Regulations, 2018 lists the eligible categories, and the list is closed. An applicant has to belong to one of them:

The stock broker figure moved. The 2022 amendment to the regulations replaced a fifty lakh rupee floor tied to a hundred times portfolio cap with a hard net worth ladder: three crore rupees within one year of notification, rising to five crore rupees within two years. Anyone reading an older write-up will still see the fifty lakh figure and the portfolio multiple, both of which are gone.

Beyond the category and net worth, regulation 35 requires the applicant to be admissible as a participant of the depository it applied through, to have adequate infrastructure, systems, safeguards and trained staff, to be a fit and proper person under the SEBI (Intermediaries) Regulations, 2008, and for the registration to be in the interests of investors. Registration is granted in Form G of the First Schedule under regulation 36.

What does a depository participant owe its account holder?

SEBI prescribes a standard Rights and Obligations document, reproduced at Annexure 3 of the Master Circular for Depositories. The clauses that matter most to a retail holder:

• No account opening charge. The document states plainly that no charges are payable for opening of demat accounts. Other charges are per the participant's tariff sheet.
• Thirty days notice before a tariff increase. A participant shall not increase any agreed charge or tariff without at least thirty days written notice.
• Segregation. Separate accounts in the name of each beneficial owner, with securities never mixed with those of other holders or with the participant's own.
• Confidentiality. Account details are not disclosed except as required by a statutory, legal or regulatory authority.
• Thirty days notice to close. A participant closing an account for any reason must give not less than thirty days written notice to the holder and to the depository.

How is a depository participant supervised?

By the depository first and SEBI behind it. The depository inspects its participants under SEBI's guidelines for inspection of DPs, supervises their branches, and reports periodically. Fines and penalties recovered from participants do not stay with the depository: they are credited to the depository's Investor Protection Fund, along with five percent of the depository's annual profits from depository operations.

Complaints have a named route. Grievances against a participant go through SCORES, and unresolved disputes can be taken to the Online Dispute Resolution portal. Depositories are required to disclose investor complaints and arbitration details on their websites.

So a depository participant is an agent with a licence, a net worth bar and a written list of duties. It is the only counterparty most investors ever see, and it is not the party that holds the record.

Flock reports the filings themselves, each one dated and linked to its source. What any disclosure means for your money is your call to make. Not investment advice.