DEPOSITORY PARTICIPANTS AUDIT

Deроsitоry framework essentiаlly аims аt eliminаting the vоluminоus аnd сumbersоme рарer wоrk invоlved in the sсriр-bаsed framework аnd оffers sсорe fоr ‘рарerless’ trаding thrоugh stаte-оf-the-аrt teсhnоlоgy.

It enаbles соnversiоn оf рhysiсаl seсurities in eleсtrоniс fоrm thrоugh а рrосess оf ‘demаteriаlisаtiоn’ (аlsо knоwn аs ‘demаt’) оf shаre сertifiсаtes аnd fасilitаtes shаre trаnsасtiоns аnd trаnsfers eleсtrоniсаlly withоut invоlving аny shаre сertifiсаte оr trаnsfer deed.

It hence аlleviаtes the hаrdshiрs fасed by the investоrs аnd аlsо оffers орtiоn tо соnvert the shаres frоm eleсtrоniс tо рhysiсаl оr рарer fоrm thrоugh а рrосess оf ‘remаteriаlisаtiоn’ (аlsо knоwn аs ‘remаt’).

The investоr hаs the сhоiсe tо hоld seсurities either in the demаteriаlised fоrm оr рhysiсаl fоrm. He аlsо hаs the орtiоn tо hоld seсurities раrtly in demаteriаlised fоrm аnd раrtly in рhysiсаl fоrm, fоr the sаme seсurity. The investоr саn аlsо withdrаw his seсurities in рhysiсаl fоrm by орting fоr remаteriаlisаtiоn

Internаl Аudit аnd Соnсurrent Аudit оf орerаtiоns оf deроsitоry раrtiсiраnts the twо deроsitоry serviсe рrоviders in indiа, viz., nаtiоnаl seсurities deроsitоry ltd. (nsdl) аnd сentrаl deроsitоry serviсes (indiа) restricted (сdsl) hаve аllоwed соmраny seсretаries in whоle-time рrасtiсe tо undertаke internаl/соnсurrent аudit оf the орerаtiоns оf deроsitоry раrtiсiраnts (dрs).

SCOPE FOR AUDIT OF DEPOSITORY ADMINISTRATIONS:

To check whether record opening customs are appropriately consented according to KYC standards.
Demat requests are sent in no less than 7 days of receipt.
Conveyance directions are placed accurately and stepped by branch authorities on receipt.
Checking whether the Conveyance guidance issue register is kept up with and refreshed on receipt of guidance.
Checking whether promise/hypothecation and delivery followed efficiently.
To guarantee that there are no income spillages.
To guarantee that all strategies and rules have been observed according to NSDL.
Adherence to all necessities and rules as referenced in the NSDL Round
Affirmation/Check of KYC consistence of DEMAT accounts as and when expected by NSDL.
Whether KYC records given by the current holder are refreshed and transferred in the KRA bundle.

THE CHECKLIST FOR AUDITING OF DEPOSITORY PARTICIPANT ARE POINTED BELOW:

I. Audit of Organisational Structure:

Whether the Member has a satisfactory framework, including staff, similar to the degree of action.
Whether the hierarchical construction is to such an extent that the responsibility, appropriate job definitions and isolation of obligations are set up.
Whether hierarchical construction and level of oversight are sufficient for the number of branches/franchisees and the number of client accounts taken care of.
Whether there is a compelling framework/method set up to keep the administration informed about extraordinary occasions like issues in equipment or any part of equipment/programming, back-up, UPS phone line, decrease in space to business proportion, staff to business proportion, lessening hard-circle space, diminishing rate of the machine, and so on.
Whether there is a successful framework/strategy to report remarkable exchange-related issues, similar to disappointment in conveyance guidance, the disappointment of exchange prompting closeout of clients, defer in affirmation to clients, loss of authentications sent for Demat, protests from clients that they have not gotten credit for the protections and so on.
Whether there is a framework/system for detailing endeavored cheats, misappropriation of protections, and so on, by clients or by any representative of the member/franchisee.

II. Audit of DPM Operations:

Whether back-up is taken consistently according to the strategy recommended by NSDL and whether a second duplicate of the back-up tapes is put away at a remote site away from the functional site.
Whether Crisis Fix Circle is made fortnightly or following any equipment/programming arrangement changes made in the server, whichever is prior.
Whether back-up of Attack Regulator Design taken on month to month premise or following circle/strike regulator fixes/redesign is made, whichever is prior.
Whether back-up of Speed-e-downloads (counting computerized signature) taken and a duplicate of the equivalent is shipped off remote website.
Whether the strategy and recurrence of download and transfer of reaction document from the Speed-e-server according to NSDL prerequisites (basically times in a day).
Whether the DPM framework is working agreeably with next to no free time and whether frameworks’ help for its equipment is accessible consistently from its sellers.
Whether size of the hardware/memory/circle space, back-up tapes, and so on, is kept up with according to even bankrupt tasks.
Whether every one of the supplies are under fitting AMC/guarantee.
Whether the variable access plot as recommended by NSDL (relationship of DPM client to appropriate gatherings, freedoms given to client bunches according to the prerequisites, creator checker idea) has been placed into activity.
Whether elective strategy for correspondence with NSDL, specifically, dial-up, is working or not.
Whether the DPM framework is genuinely and legitimately very much depositoryguarded from unapproved access.
Whether against infection programming is stacked/updated occasionally on the DPM framework.
Whether the Handouts and other data sent by NSDL on the MS Trade is perused consistently.
Whether any outer programming other than the DPM programming, SQL, Windows NT, Web Wayfarer, MS Trade or some other programming explicitly allowed by NSDL is found stacked on the DPM framework.
Whether the DPM framework is associated with LAN/WAN of the Member with the authorization of significant specialists.

III. Audit of Record Opening Procedures:

Whether confirmation of character and home is gathered according to NSDL prerequisites.
Whether important archives are gathered from clients, for example, corporates, NRIs, OCBs, FIIs, and so on.
Whether important records are gathered from Speed-e clients at the hour of opening Rate e account, resetting secret phrase, adding pre-told accounts, and so on.
Whether the system for dispatch of the brilliant card and the PIN (if there should be an occurrence of Speed-e clients) is constantly trailed by the DP, i.e., sending the savvy card and the PIN independently.
Whether DP has kept up with the records in its internal data set concerning subtleties of Speed-e application structures according to NSDL necessities.
Whether an understanding is executed with each client.
Whether the client is given duplicate of the understanding and the timetable of charges.
Whether there is a framework set up to guarantee that the client accounts are not opened in that frame of mind of the organization firm, ownership firm or for the sake of HUF.
Whether the client signature has been properly put away in actual structure and checked into the framework.
Whether the information passage in the framework is rigorously and totally as per the data outfitted by the client in the record opening structure and according to NSDL necessities.
Whether there is the satisfactory component to guarantee that all the record opening structures acknowledged are as a matter of fact entered in the DPM framework and the client is given the client ID solely after the account comes in ‘Dynamic’ status.
Whether there is a component set up to guarantee that the progressions in the segment subtleties are refreshed in the DPM framework (say, for change of address, and so on) in view of legitimate authorisation and solely after gathering new evidence of address from the client.
Whether the method followed for opening the records and adjusting ignorant individual followed according to NSDL prerequisites.
Whether any beneficial understanding/letter of affirmation, and so on is executed notwithstanding standard DP Client arrangement.
Whether sufficient are records kept up with for conclusion/freezing/thawing of client account. This incorporated the method followed by the Member in regard of records, which had no equilibrium at the hour of shutting the record.

IV. Audit of Demat Request

Whether there is a framework/procedure set up to forestall acknowledgment of protections, which are not owned up to the NSDL framework.
Whether Demat requests got are shipped off the recorders somewhere around seven days from the date of receipt of the solicitation from the client at the branch/franchisee/assortment focus or controlling office.
Whether there is a framework set up, that guarantees that endorsements are sent by the Member to the right location of the recorder/organization.
Whether there is a framework/method set up to illuminate the client in the event that regarding the dismissal of Demat request.
Whether there is a framework/system set up for disfiguring/destroying declarations in the recommended way gotten for Dematerialisation.
Whether there is an arrangement for supervision the protections got until they are dispatched to Guarantor/Recorder and Move Specialist.
Whether there is a framework set up to dissect the specific explanations behind Demat dismissals and Demat postponements and make remedial moves, particularly, when the oddballs or deferrals were owing to the member.

V. Audit of Delivery Instructions:

Whether and how every one of the clients have been educated regarding the timetable of acknowledgment cutoff times for conveyance guidelines.
Whether there is a framework set up to date and time stamp all the conveyance guidelines got from the clients on both the Member duplicate and the client duplicate.
Whether there is a framework set up to reasonably stamp the conveyance guidelines got past the previously mentioned cutoff times as gotten at clients’ gamble and would be executed on a best-exertion premise.
Whether the conveyance guidance slips gave to clients (counting between depository move guidance slips) have pre-stepped client ID and pre-printed chronic number and there is command over issue of guidance slips to the clients.
Whether conveyance guidance booklets are given to the clients in view of the request slips as it were.
Whether free conveyance guidance slips are given to the clients? In the event that indeed, what is the procedure?
Whether there is command over clear guidance booklets.
Whether there is command over guidance slip number at the hour of acknowledgment from the clients? On the off chance that indeed, whether the slip number approval is done physically or in administrative center programming.
Whether satisfactory data is made accessible to clients on DP-IDs, ISINs, Corporate Activity subtleties, and so forth.
Whether the client directions are being executed in DPM framework according to the execution date given by the clients.
Whether there is a framework set up to screen fruitful execution of guidelines entered in the DPM framework.
Whether the guidelines are executed according to the conveyance guidance structure given by the client. The Member ought to likewise check the mark of the client and completely fulfill itself that guidance is to be sure given by the client himself.
Whether satisfactory measures have been taken to depositoryguard the Member in the event that fax guidelines are acknowledged. Whether it is guaranteed that the first guidelines are gathered and there is a strategy set up to forestall the twofold execution of a similar guidance.
Whether there is framework set up to educate the client on the off chance that regarding bombed guidelines. If indeed, depict something very similar.
Whether there is a framework/system set up to redress wrong exchanges done by the Member or some other Member? In the event that indeed, depicts something very similar.
In the event that the Member is tolerating conveyance guidelines joined by PC printouts from the Clearing Part/Client, whether the circumstances endorsed for such acknowledgment are being met.

VI. Back Office Software:

Whether DP involves the administrative center programming with the end goal of storehouse related exercises.
What exercises are done in the administrative center regarding depository related exercises? (E.g., information section as for Record opening, Demat, remat/repurchase, settlement, vow, Stock Loaning and Acquiring, Explanation of Exchange, and so on.)
Whether there is a writing material control (slip number approval) in the administrative center concerning the accompanying: Record of issuance of conveyance guidance slips to the clients including issuance by branches, if any; Receipt and handling of guidance slips got from clients; Arrangement for hindering of guidance slip numbers, which are as of now utilized or detailed lost/lost/taken.
Whether Explanations of Exchange are (or some other reports like client ace report, and so on) sent from the administrative center? On the off chance that indeed, whether the subtleties of the equivalent coordinate with explanation or report created from DPM.
Whether the administrative center (counting site) is refreshed routinely for the exchanges done on the DPM.
Whether the backup of information dwelling in the administrative center (or any information kept up with in electronic structure) concerning depository activities is taken daily.

ELIGIBILITY CONDITION FOR DEPOSITORY SERVICES

Any organization or other foundation to be qualified to give depository administrations must :
be framed and enlisted as an organization under the Organizations Act, 1956.
be enlisted with SEBI as a store under the SEBI Act, 1992.
has outlined bye-regulations with the past endorsement of SEBI.
has at least one participant to deliver depository administrations for its benefit.
has satisfactory frameworks and shields to forestall the control of records and exchanges as per the general inclination of SEBI.
follow Depository Act, 1996 and SEBI (Depositorys and Participants) Guidelines, 1996
meets qualification measures regarding the constitution, organization, and so on.

INTERNAL AUDIT AND CONCURRENT AUDIT OF OPERATIONS OF DEPOSITORY PARTICIPANTS

The two Depository specialist co-ops in India, viz., Public Protections Store Ltd. (NSDL) and Focal Depository Administrations (India) Restricted (CDSL) have permitted Organization Secretaries in Entire time Practice to embrace inner/concurrent audit of the activities of Storehouse Participants (DPs).

Internal Audit of Depository Participants –

Each Member will guarantee that an internal audit in regard to the tasks of the Depository is directed at time frames of more than three months by a certified Organization Secretary or a Contracted Accountant holding a Declaration of Training and a duplicate of the interior audit report will be outfitted to the Storehouse.”

The time of 90 days has been raised to a half year.

Cost and The board Bookkeeper has likewise been incorporated

CDSL has vide its letter dated September 28, 1999 informed revision as follows:

“Each Member will guarantee that an inner audit will be led in regard of the member’s tasks connecting with Compact discs by a certified Sanctioned Bookkeeper as per the arrangements of the Contracted Bookkeepers Act, 1949 or by an Organization Secretary by and by as per the arrangements of the Organization Secretaries Act, 1980, at such stretches as might be determined by Cds every once in a while. A duplicate of Internal Audit report will be outfitted to Compact discs.”

Concurrent Audit of Depository Participants –

NSDL has prompted every one of the participants that the course of Demat account opening, control and check of Conveyance Guidance Slips (DIS) will be dependent upon Concurrent Audit by a firm of Organization Secretary(ies) holding declaration of training or qualified Contracted Accountant(s). Participants on the off chance that they so want, can share the concurrent audit with their Internal Inspectors.

The Concurrent Auditor ought to direct the audit in regard to all records opened, DIS gave and controls on DIS, during the day, by the following working day. On the off chance that the audit couldn’t be finished inside the following working day because of huge volume, the inspector ought to guarantee that the audit is finished in the span of seven days’ time.

Further NSDL has extended the extent of concurrent audits to incorporate

(1) account conclusion started by the member;

(2) financial backer complaints got by the member;

(3) overarching legal authority adjustments;

(4) giving exchange explanations to clients. Any deviation and additionally resistance seen in the aforementioned regions ought to be referenced in the audit report of the Concurrent Evaluator. The Administration of the Member ought to remark on the perceptions made by the Concurrent Examiner.