Stock Market

3.demat account

I'm taking example of India here as I'm from India.  In India, a demat account, the abbrevation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker. 

This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a demat account should possess a Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007. 

Procedure

1.Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened).
2.Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation.
3.Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent .
4.After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities. 

The benefits

- A safe and convenient way to hold securities;
- Immediate transfer of securities;
- No stamp duty on transfer of securities;
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.;
- Reduction in paperwork involved in transfer of securities;
- Reduction in transaction cost;
- No odd lot problem, even one share can be sold;
- Nomination facility;
- Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;
- Transmission of securities is done by DP eliminating correspondence with companies;
- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.
- Holding investments in equity and debt instruments in a single account.

Required Documents

The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings, current and, or other account for which the holder have been issued a check book, such holder has an edge over the non-account holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list:

- A canceled check, preferably MICR
- Proof of Identification
- Proof of Address
- Proof of Pan card (mandatory)
- Recent photographs, one and, or more

For proof of identification and, or address self-attested facsimile copies of PAN card, Voter’s ID, Passport, Ration card, Driver’s license, Photo credit card, Employee ID card, Bank attestation, latest IT returns and, or latest Electricity/Landline phone bill are sufficient. While they only ask for photocopies of the documents, they will need the originals for verification.