Investor refers to the Beneficial Owner, the one who invests in the company’s securities.
Advantages of Depository System to the Investor are as follows:
(i) No Risk: Risks related to physical certificates like delays, loss of certificates, theft, mutilation, bad deliveries, etc. are totally eliminated.
(ii) Safety of Investment: The safest and secure way of holding securities is in the form of DEMAT. It is controlled under Depositories Act and monitored by SEBI. For e.g. If we don’t want to deal in securities, for the time being, we can freeze the account instructing DP to avoid unexpected debit or credit.
(iii) Easy Transfer of Shares:
- There is no need of filling transfer form and submitting documents.
- Stamp duty is not applicable in this process.
- Cash realization and security transfer take place very fast.
(iv) Updated information: The investor receives updated information about his transactions and holdings from DP and also sometimes from Depository.
(v) Loan against securities: An investor can raise a loan from the banks against the security of Dematerialized securities.
(vi) No ‘Lots’: The lot system has been abolished. The market lot is one share for dematerialized securities.
(vii) Nomination Facility: Nomination Facility is allowed under the Depository system. In the event of the death of the investor, the process becomes simple.
(viii) Automatic Credit: The investor’s account is automatically credited or debited by the company. This is called ‘Corporate Action.’ For e.g. Payment of dividend, Bonus Issue, Right Issue, Redemption, etc.
