Central Depository Agents (CDAs) open and maintain Securities Accounts. These comprise Clients' Securities Accounts and Participants' (proprietary/dealers) Securities Accounts which are segregated from each other. Clients' Securities Accounts are opened through and/or registered with a Central Depository Agent (Stockbroker/Investment Bank or Custodian Bank). A Client may open accounts with several Central Depository Agents.
CDSC accepts deposits of securities certificates from Clients through CDAs. To use the CDSC Depository services, the investor opens a Securities accounts in the CDS system through a CDA. Deposited certificates are forwarded to the registry of the issuer by CDSC for confirmation of the authenticity thereof. Clients' Securities Accounts are credited only upon receipt of the written confirmation of the authenticity of the deposited certificates from the registry. This process eliminates the risk of introducing invalid securities in the CDS system.
Pledges & Releases
The Depository Services also include the recording of pledges in favour of lending institutions with the agreement of both the borrower & the lending institution.
This is the process by which shares are used as collateral. A standard pledge form (CDS 5) is completed by the client and approved by the CDA and the lender. The completed form is delivered to CDSC by the CDA where the securities are frozen and confirmation is done directly to the lender. Once the loan has been cleared, a release form (CDS 6) is completed by the lender and the CDA, and delivered to CDSC where the shares are released.
In the records of CDS, a pledgor remains the shareholder of the pledged securities. However, the pledgor cannot access these shares unless the pledgee submits the appropriate pledge release instruction (CDS 6) in accordance with CDSC Procedures.
An investor may register a CDS account with more than one CDA (broker/investment bank). The CDS account number remains the same. The investor can transfer securities from one CDA to another by making the request through their current Central Depository Agent.