The Depositories’ Bit Part in Investor Protection

Zeenat UL Kubra
School of Law, KIIT University, India.

Volume III – Issue I, 2021

“The Regulatory framework as well as operational procedures prescribed for depositories and participants, provide for a number of measures aimed at protecting investors’ interest within the Depository System.”[1]

A depository is an entity/ body which help an investor to sell or buy securities such as bonds and stocks in a paper-less manner. Securities in depository accounts are held and transacted in electronic mode. Here came the concept of dematerialization, where physical certificates are converted in electronic records. These are registered, operated and regulated under the supervision of SEBI (The Securities and Exchange Board of India).

Two depositories which are registered under SEBI are- National Securities Depositories Limited NSDL and Central Depository Service Limited (CDSL). The safety provided to the investor’s are 3 fold, Firstly, the technical safety of data is ensured. All transactions are absolutely safe as several built- in safety measures are taken up by the depositories to ensure complete security of the investor’s holdings. Secondly, security is provided in processing operation or regular transaction where a system of check and follow up is maintained in order to avoid any false/ fraudulent act against investors. Lastly, the investor’s own vigilance and awareness is appreciated and maintained. These precautions are generally suggested by NSDL for the benefits of account holder’s towards managing their Demat accounts.

[1] Vijay K. Gaba, Taxmann’s Depository Participants Law and Practice


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