A PROJECT RERORT ON PRINCIPLES AND TRADING RULES OF DEMATRALISATION A/C COMPANY KANTILAL CHHAGANLAL SECURITY Pvt.

LIMITED SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY:ANITA AGRAWAL MBA 3RD SEM

SUBMITTED TO:MR. S. P. PARIHAR

PREFACE

At each and every aspect in life we require some sort of theoretical knowledge too. It means only class room lecture may not be enough to get the proper knowledge to us either in the business field or in social life. This report is based on the Principal and Trading Rules of Dematerialization A/C. Before I present this report to the concerns I would like to say that knowledge of current management issues are important for better managerial knowledge. I have tried my level best for preparing this report.

Acknowledgement

pray as if everything depend upon God and Work as if everything depends on men I like the opportunity to offer my gratitude to all the people who directly or indirectly helped me in the successful completion of the report. A deep sense of gratitude is owned to all the faculty members of YIT who extend their support and assistance. Needless to say, their knowledge and experience had served as a continuous source of encouragement and motivation. Without their invaluable support guidance this report would not have been possible. My last thanks to Mr. Mathur Sir for their support and motivation, which has been a source of inspiration at every step of my report.

Place : Jaipur

ANITA KUMARI AGRAWAL

Declaration
I hereby declare that this report on PRINCIPAL AND TRADING RULE OF DEMATRALISATIN A/C has been written and prepared by me during the academic year 2010-2011.This project was done under the able guidance and supervision Mr. Ravi Dadhich, Branch manager Kantilala Chhaganlal Securities Pvt. Ltd., Calicut in partial fulfillment of the requirement for the Master Of Business Administration Degree course.

I also declare that this project is the result of my own effort and has not been submitted to any other institution for the award of any Degree or Diploma.

Place: Jaipur Anita Agrawal

Executive Summary
The objective of the project was to do PRINCIPAL AND TRADINGRULEOF DEMATRALISATION A/C COMPANY KANTILAL CHHAGANLAL SECURITY Prt.LIMITED for that we have to understand the customer needs, Income, constraints, response and emotions so that they can contribute their time for becoming Life advisors for the company. The objective of this study was to analyze consumer satisfaction of mechanical splicing in Jaipur city with respect to the performance, sales effort and sales service. As the company was new and it was yet to be marketed to a large number of customers, it was essential to know the feedback of customers in order to formulate effective marketing and sales strategies in future and improve the quality of service to achieve better consumer satisfaction. The site visits and companying made us possible to measure the satisfaction of consumer by identifying the attributes, which gave consumer-varying degrees of satisfaction. Questionnaire based on company format so e attributes like requirement of customer and sales services offered by company were identified as critical (motivational) factors for providing satisfaction to consumers, while other factors like excisable deposit center, premium collocation was time to time and also intimation regaining before the collocation of premium. But absence of such hygienic factors definitely results in a dissatisfied consumer. These hygienic factors could result in selling but their absence can certainly unseal the product offering. For this a questionnaire was prepared which gave a vague idea about the people who were really interested and wanted to know about various new opportunities in the insurance sector. Go through questionnaire in different different area and people in the JAIPUR city. The study was undertaken for JAIPUR region during two months. The researchers were given first 15 days for collection of data and scanning the data. The questionnaire contains various aspects like there. Address, their present age, profession, number of dependents, Goals and also planning for old age (Retirement) etc. The second part of the study that consists of 40 days contains scanning the questionnaire and taking appointments.

CONTENTS
S.NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. Topic Title of the project Certificate Preface Acknowledgement Declaration Executive summery Company Profile Introduction & History Research Methodology 2 3 4 5 6-7 8-9 10 Page No. 1

9.1 9.2 9.3

Scope of study
Data collection Data interpretation and analyses

11-17 18-20 20-22

13. 14.

Observation and findings Limitation and Recommendation

23-25 39

15. 16. 15.

Conclusion Bibliography Annexure

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COMPANY PROFILE:
ABOUT US:
Kantilal chhaganlal is a name synonymous with wealth management. Established in 1954, Kantilal Chhaganlal has stood the test of time which speaks volumes about the reliability and expertise of the firm. Backed by a highly dedicated and professional team, Kantilal Chhaganlal offers it 60,000 plus clientele a bouquet of customized, end to end, wealth management solutions, With its presence at more than 500 locations across India, the company ensues its clientele, uncompromised performance and a focused approach. Whether its in terms of research, technology, service or in terms of being first to offer innovative products and solution, Kantilal Chhaganlal is not only at par with todays demands but also ahead of its time.

PRODUCTS AND SERVICES:

Broking 1. Equities 2. Derivatives 3. Commodities Internet Trading Loan Against shares Mutual Funds Life Insurance Depository Services IPOs PMS and Structured Products

WHY KANTILAL CHHAGANLAL?

Experience: With over 5 decades of experience in wealth management we enjoy the trust of over 60,000 satisfied clients. Client Centric Modal: Client Satisfaction is an asset. Hence the clients interest precedes our interest. Our stringent internal customer service standards ensure that you enjoy the best in class service. Technology: It has been a constant endeavor to hammers the best of technologies to ensure that the clients get maximized returns. Strong Operations & Research Desk: With over 50 years of experience, the company has one of the best operations and research cells in the industry. Wide Network: Presence all across India with over 500 locations ensures that we are never far away from you.

VALUES
Unification of clients interests with the companys business interests. Maintaining a high level of integrity, transparency and ethical values. A No Compromise attitude for quality with a passion for excellence. Client centric model with a clear focus on providing long term value added services while maintaining the highest standards of professionalism.

Introduction:
A widely disseminated either, nor in such distress followed so quickly on the heels 1The equity brokerage industry in India is one of the oldest in Asia. India had an active stock market for about 150 years, won a significant role in the development of risk markets as well as to promote and support business growth in the industry. The roots of any stock exchange in India began in the 1860s during the American Civil War, which led to a sudden increase in demand for cotton from India for the construction of a number of public companies, the securities issued to obtain financing. This trend was used to the rapid growth of securities markets in Europe and North America in the context of the development of the railway and exploration of natural resources and land development.

History:
Historical records show that as early as 1864, there were about 1,000 brokers with the stock market operation from three locations in Mumbai, between 9-7 Clock at the junction of Meadows Street and Rampart row, from dawn to 9 clock and clock from 7 to early hours of the next morning at Bazargate. Share prices rose sharply even then. A share of Colaba Land Company during the boom of the 1860s rose from Rs 10,000 at par to Rs 120,000 and the Back bay shares rose by 2,000 to Rs Rs 54,000. Bombay, then, was an important financial center, located 31 banks, 20 insurance companies and 62 joint stock companies.

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Reports on stock markets at this time show that an ordinary broker in 1864 earns about Rs 200 per day, a huge sum in those days. The boom came to an abrupt end 1865th In July 1865, which was then used to be called the share mania with the bursting of the bubble ended in the stock market? I never had any place in a run of such a witness s prosperity, said said Richard Temple, who served as governor of Bombay at this time.

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RESEARCH METHOLOGY:

(9.1) Scope of study:

NIFTY &STOCKOPTION TIPS:
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(9.2)

13

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Qualification of the respondent

15

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(9.4)TYPE OF RESEARCH:
What is data collection?
Data collection is simply how information is gathered. There are various methods of data collection such as personal interviewing, telephone, mail and the Internet. Depending on the survey design, these methods can be used separately or combined. The Data Collection Methodology team (DCM) advises on data collection methods for all ONS social and business surveys and the Census. With clients both within the ONS and the wider government community, we aim to provide expert advice on data collection procedures and carry out research leading to improvements in survey quality. DCM advises on a diverse range of surveys. To do this the team assesses the various survey processes at the data collection stage. Aims DCM contributes to the development of a common statistical infrastructure for ONS. The team aims to provide business areas with methodological standards and expert advice on procedures to minimise error, in order to produce accurate survey estimates and thereby maintain the quality of data output. DCM is also involved in ongoing research to assess and improve methods of data collection, and in developing new ways of collecting data, for example via the web.

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Current and planned areas of work The main work we do involves giving advice, support and methodological expertise in the following areas:

standards and principles of designing, testing, evaluating and implementing survey processes at the data collection stage expert reviews of questionnaires/data collection instruments cognitive question testing to develop questions for surveys moderation of focus groups to discuss survey topics and concepts measurement and reduction of non-response error implementation of standard response outcome codes methods of calculating response rates methods of identifying key responders for priority response chasing coding and social classification for surveys new and improved methods of data collection

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Data interpretation and analyses:

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(9.5)

OBSERVATION AND FINDINGS:

I have perused the submissions made by IBSL in various letters mentioned above and considered the oral submissions made by it during the time of hearing on November 10, 2006 and other materials available on record. In the facts and circumstances, the following issues are framed for consideration.

a) whether the demat account holders from whom IBSL had received the shares of TCS through off market transactions were genuine or not and whether there were multiple accounts with a common address?

I note that the inspection carried out by NSDL and the team of officials of SEBI, NSE and BSE did not indicate anything suspicious to raise doubts about the genuineness of the demat account holders.

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In the sampling process as employed in the IPO investigation, the account of IBSL got picked up as the key operator by the sample size with its attendant parameters. On detailed examination in the course of inspection by NSDL and also by a team of officials of SEBI, BSE and NSE, it transpires that the 559 accounts do not have the characteristics of a typical afferent account, while DP account no. 10131283 of IBSL partakes the character of the client margin account of IBSL. The same finding is further strengthened by the fact that Shri Ajay Kumar Gupta who was treated as a financier in the interim order dated April 27, 2006 in the unfolding scheme as per the parameters employed was found to be a man of limited resources, thereby raising a question on the financial competence of the beneficial owner. In any event, none of these accounts have been identified as afferent accounts actively involved in the manipulation of IPO allotment. In the facts and circumstances of the case, there is nothing on record to show that the 559 demat accounts holders from whom IBSL had received the shares of TCS through off market transactions were not genuine. On the basis of the above discussions I find merit in the submissions of IBSL that they had received TCS shares in its client margin account from various clients as a stock broker and not as a key operator for cornering of IPO allotment shares and for its manipulation.

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(9.6) Limitation and Recommendation

Key Features of Platinum Platform:
1. All the features of Gold are available in Platinum 2. Professional, Classic, Customized Market Watches 3. Fast trade execution with instant trade confirmation through pop-up 4. View Cash, F&O and Currency quote in a single market watch screen 5. Real-time updation of Index & Tick by Tick updation of index chart 6. Intraday & EOD 7. Sophisticated studies such as Technical indicators can be performed by using appropriate parameters. HDFC Demat Account Single A/C, Multiple Benefits. Easy Trading. Open a Trading Account Now www.HDFCSec-Easyinvest.com 95-99% Accuracy tips Earn Rs150000/month in Equity and Commodity call (0281) 6686666 www.sbaasl.com Demat Account Comprehensive Market Coverage and Expert Recommendations EconomicTimes.indiatimes.com/Market

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FACTS AND FINDINGS:

Directional Movement (DM) summary:

1. Today's high > yesterday's high (and today's low > yesterday's low) = +DM 2. Today's low < yesterday's low (and today's high < yesterday's high) = -DM 3. Inside day (today's low > yesterday's low and today's high < yesterday's high) = no DM (either +DM or - DM) 4. For outside days, take the larger of today's high - yesterday's high or yesterday's low - today's low. If these figures are equal, there is no DM. To make the directional movement readings meaningful for all markets, Wilder divided the DM by the market's true range. This creates a directional movement indicator (DMI) in a form of a ratio and allows for meaningful comparisons regardless of various market prices. In other words, the DMI of a $5 stock can be compared to the DMI of a $100 stock. Because one day does not a trend make, the DMI is then averaged over a number of days. The magnitude of the trend reflected by the ADX--longerterm or shorter-term--depends on the number of days in this calculation. Wilder's default, and the number widely used by charting software packages (and TradingMarkets.com), is 14 days. The Average Directional Movement Index (ADX) is then calculated by taking the difference between the smoothed +DMI and -DMI calculations. It's obvious the ADX calculation is very complex, but if you understand the directional movement detailed previously, you'll have a good understanding of how the indicator works and enough background to use it.

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Amazon.com, daily. +DMI greater than -DMI reflects an uptrending market.

(11) RECOMMENDATION & SUGGESATIONS

The 22 Rules of Trading

We give you Master Trader Dennis Gartmans 22 Rules of Trading, many of which you can apply to all sorts of life situations, as well as the markets. Every day, Dennis Gartman gets up at bout 2:30 AM and writes an information packed 4 page newsletter on the world markets, oil, currencies, commodities political happenings and much more. He is read by the major trading houses and traders all over the world, as they stumble bleary eyed into work, grabbing the Gartman Report to find out what happened as they slept and to get insight as to what the issues of the day will be, and suggestions on how to trade.

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Dennis puts his trades on public display and talks you through his logic. It is a most remarkable work, and I find it a key part of my struggle in trying to keep up with what is going on. I am always amazed when on the occasions I find myself in the office at an early hour to find Dennis' letter hit my inbox about 5:00 AM. His travel schedule makes mine look tame, and from wherever in the world he finds himself, he writes and sends his letter. And he still maintains a single digit handicap on the golf course. On the Friday after Thanksgiving, he publishes his "Rules of Trading," adding to them as wisdom increases. Here is today's list: 1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin! 2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand. 3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital. 4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way. 5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

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6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe. 7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones. 8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important. 9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it. 10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade. 11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals. 12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

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13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not. 14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights. 15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements. 16. Bear markets are more violent than are bull markets and so also are their retracements. 17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large. 18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed. 19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold. 20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then. 21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.

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22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!

What is Equity
Equity is financial instrument by which company invites the public to invest their money in the company and investor can become a partner of the company. Generally, when the company have insufficient money to expand its business it comes with equity shares.

What is Equity Market

The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital area of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance. This market can be split into two main sectors: the primary and secondary market The primary market is where new issues are first offered. Any subsequent trading takes place in the secondary market.

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What is Equity Trading

Equity trading is the buying and selling of company stock shares. Shares in large publicly-traded companies are bought and sold through one of the major stock exchanges, which serve as auctions managed for trades. Stock shares in smaller public companies are bought and sold in over-the-counter market. Equity trading can be performed by the owner of the shares, or by an agent authorized to buy and sell on behalf of the share's owner. Proprietary trading or principal trading is buying and selling for the trader's own profit or loss. In this case, the principal is the owner of the shares. Agency trading is buying and selling by an agent, usually a stock broker, on behalf of a client. Agents are paid a commission for performing the trade.

What is Demat account

Demat refers to a dematerialized account. Though the company is under obligation to offer the securities in both physical and demat mode, you have the choice to receive the securities in either mode. If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application. It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen.

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Demat Account Definition

Demat refers to a dematerialized account. Though the company is under obligation to offer the securities in both physical and demat mode, you have the choice to receive the securities in either mode. If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application. It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen. Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, Nowadays, you need to open a demat account if you want to buy or sell stocks.

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HOW TO OPEN A DEMAT A/C ?

Opening an individual Demat account is a two-step process: You approach a DP and fill up the Demat account-opening booklet. The Web sites of the NSDL and the CDSL list the approved DPs. You will then receive an account number and a DP ID number for the account. Quote both the numbers in all future correspondence with your DPs. So it is just like a bank account where actual money is replaced by shares. You have to approach the DPs (remember, they are like bank branches), to open your demat account. Let's say your portfolio of shares looks like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will show in your demat account. So you don't have to possess any physical certificates showing that you own these shares. They are all held electronically in your account. As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.

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Is a demat account a must?

Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of up to 500 shares to be settled in physical form, nobody wants physical shares any more. So a demat account is a must for trading and investing. Most banks are also DP participants, as are many brokers. You can choose your very own DP. To get a list, visit the NSDL and CDSL websites and see who the registered DPs are. A broker is separate from a DP. A broker is a member of the stock exchange, who buys and sells shares on his behalf and on behalf of his clients. A DP will just give you an account to hold those shares.

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(12) Bibliography
You do not have to take the same DP that your broker takes. You can choose your own. Share Market Guide Trading Stocks Share Trading Intraday Trading NSE Stock Index BSE Calls Stock Market Chart Stock Future Tips Shares Invest Account Bank Stocks India Stock Shares

Banks are also advantageous because of the number of branches they have. Some banks give the option of opening a Demat account in any branch, while others restrict themselves to a selected set of branches.

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Some private banks also provide online access to the Demat account. So, you can check on your holdings, transactions and status of requests through the net banking facility. A broker who acts as a DP may not be able to provide these services.

DEMAT ACCOUNT OPENING COST AND OTHER CHARGES

The cost of opening and holding a Demat account. There are four major charges usually levied on a Demat account: Account opening fee, annual maintenance fee, custodian fee and transaction fee. All the charges vary from DP to DP. Depending on the DP, there may or may not be an opening account fee. Private banks, such as ICICI Bank, HDFC bank and UTI bank, do not have it. However, players such as Karvy Consultants and the State Bank of India charge it. But most players levy this when you re-open a Demat account, though the Stock Holding Corporation offers a lifetime account opening fee, which allows you to hold on to your Demat account over a long period. This fee is refundable.

DEMATERIALISATION OF SHARES:
Trading in the shares of the Company is compulsory in dematerialized form for all investors. The Company has, therefore, enlisted its shares with both the depositories, viz, NSDL and CDSL. This means that you have now have the option to hold and trade in the shares of the Company in electronic form.

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 Annual maintenance fee: This is also known as folio maintenance charges, and is generally levied in advance. Custodian fee: This fee is charged monthly and depends on the number of securities (international securities identification numbers ISIN) held in the account. It generally ranges between Rs. 0.5 to Rs. 1 per ISIN per month. DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository. Transaction fee: The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to he transaction value, subject to a minimum amount. The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs.

What is a Depository?
A Depository (NSDL & CDSL) is an organisation like a Central Bank where the securities of a shareholder are held in the electronic form at the request of the shareholder through the medium of a Depository Participant. If an investor wants to utilise the services offered by a Depository, the investor has to open an account with the Depository through a Depository Participant. So is a depository just another form of a custodial service, the only difference being that the securities are held in an electronic form?

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No, the two are different. The Depository can legally transfer beneficial ownership which a custodian cannot. The main objective of a Depository is to minimize the paper work involved with the ownership, trading and transfer of securities.

Who is a Depository Participant?

Similar to the brokers who trade on your behalf in and outside the Stock Exchange; a Depository Participant (DP) is your representative (agent) in the depository system providing the link between the Company and you through the Depository. Your Depository Participant will maintain your securities account balances and intimate to you the status of your holding from time to time. According to SEBI guidelines, Financial Institutions like banks, custodians, stockbrokers etc. can become participants in the depository. A DP is one with whom you need to open an account to deal in electronic form. While the Depository can be compared to a Bank, DP is like a branch of your bank with whom you can have an account.

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Contents:
1 Advantages of Demat 2 Indian Market Scenario 3 Object Of Demat System 4 Demat Benefits 5 Demat conversion 6 Demat Options 7 Fees Involved 7.1 Account-opening fee 7.2 Annual maintenance fee 7.3 Custodian fee 7.4 Transaction fee 8 Opening an account 9 Disadvantages of Demat 10 Transfer of Shares between

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(1)

Advantages of Demat

The demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments.

(2)

Indian Market Scenario

Indian capital market has seen unprecedented boom in its activity in the last 15 years in terms of number of stock exchanges, listed companies, trade volumes, market intermediaries, investor population, etc. However, this surge in activity has brought with it numerous problems that threaten the very survival of the capital markets in the long run, most of which are due to the large volume of paper work involved and paper based trading, clearing and settlement.

(3)

Object Of Demat System

India has adopted this system in which book entry is done electronically. It is the system where no paper is involved. Physical form is extinguished and shares or securities are held in electronic mode. Before the introduction of the depository system by the Depository Act, 1996, the process of sale, purchase and transfer of shares was a huge problem and the safety perspective was zero.

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(4)

Demat Benefits

The benefits are enumerated as follows: Its a safe and convenient way to hold securities Immediate transfer of securities is there There is no stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc There is a major reduction in paperwork involved in transfer of securities,reduction in transaction cost etc.

Benefit to the Company

The depository system helps in reducing the cost of new issues due to less printing and distribution cost. It increases the efficiency of the registrars and transfer agents and the Secretarial Department of the company. It provides better facilities for communication and timely services with shareholders, investor etc.

Benefit to the Investor

The depository system reduces risks involved in holding physical certificated, e.g., loss, theft, mutilation, forgery, etc.It ensures transfer settlements and reduces delay in registration of shares. It ensures faster communication to investors. It helps avoid bad delivery problem due to signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid on transfer of shares. It provides more acceptability and liquidity of securities.

Benefits to Brokers
The depository system reduces risk of delayed settlement. It ensures greater profit due to increase in volume of trading. It eliminates chances of forgery bad delivery. It increases overall of trading and profitability. It increases confidence in investors.

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Demat conversion

Converting physical holding into electronic holding (dematerializing securities) In order to dematerialize physical securities one has to fill in a DRF (Demat Request Form) which is available with the DP and submit the same along with physical certificates one wishes to dematerialize. Separate DRF has to be filled for each ISIN Number. The complete process of dematerialization is outlined below: Surrender certificates for dematerialization to your depository participant. Depository participant intimates Depository of the request through the system.

(6)

Demat Options

Banks score over others Around 200 depository participants (DPs) offer the demat account facility. A comparison of the fees charged by different DPs is detailed below. But there are three distinct advantages of having a demat account with a bank quick processing, accessibility and online transaction. Generally, banks credit your demat account with shares in case of purchase, or credit your savings accounts with the proceeds of a sale on the third day. Banks are also advantageous because of the number of branches they have.

(7)

Fees Involved

There are four major charges usually levied on a demat account: Account opening fee, annual maintenance fee, custodian fee and transaction fee. All the charges vary from DP to DP.

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(7.1) Account-opening fee

Depending on the DP, there may or may not be an opening account fee. Private banks, such as HDFC Bank and UTI Bank, do not have one. However, players such as ICICI Bank, Globe Capital, Karvy Consultants and the State Bank of India to do so. But most players levy this when you re-open a demat account, though the Stock Holding Corporation offers a lifetime account opening fee, which allows you to hold on to your demat account over a long period. This fee is refundable.

(7.2)Annual maintenance fee

This is also known as folio maintenance charges, and is generally levied in advance.

(7.3)Custodian fee
This fee is charged monthly and depends on the number of securities (international securities identification numbers ISIN) held in the account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository.

(7.4)Transaction fee
The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, subject to a minimum amount. The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs.

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(8)

Opening an account

Steps involved in opening a demat account First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. Besides, production of PAN card in original at the time of opening of account has been made mandatory effective from April 1, 2006.

(9)

Disadvantages of Demat

The disadvantages of dematerialization of securities can be summarized as follows: Trading in securities may become uncontrolled in case of dematerialized securities. It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors. The role of key market players in case of dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market.

(10)

Transfer of Shares between DPs

To transfer shares, we need to fill the Depository Instruction Slip Book (DIS). Firstly we need to check, whether both Demat account's Depository Participant is same or not(CDSL or NSDL) If both of them are different, then we need an INTER Depository Slip (Inter DIS). If they are same, then we need INTRA Depository Slip (Intra DIS). For example: If we have one Demat account with CDSL and other Demat account with NSDL, then we need an Inter DIS.

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Equity Trading

Demat account

In finance, equity trading is the buying and selling of company stock shares. Shares in large publicly-traded companies are bought and sold through one of the major stock exchange s, such as the New York Stock Ex...

The term Demat, in India, refers to a dematerialized account. For individual Indian citizens to trade in listed stocks or debenture s. The Securities Exchange Board of India (SEBI) requires the investor to maintain ...

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We do not need a new National Identity Register (NIR)

If you are going to operate an ID voucher scheme, you need a list of IDs, a population register of some sort. Different countries adopt different approaches. Some have a single centralized database. Some have several distributed databases. BCSL's suggestion for dematerialized ID is to adopt the distributed database approach, involving a mixture of existing public sector and private sector databases.

... which is just as well, the government record with IT systems is lamentable
Recall the problems of government contracts let to Accenture/Arthur Andersen, EDS, Siemens, Capita and other IT services companies. The government are not good at computer systems. Think of the Child Support Agency, which is now finally going to be abandoned. Think of the National Health Service (NHS) National Programmed for IT, two years behind schedule and 100% over budget. Think of the tax credits system its website had to be taken down to stop growing fraudulent use and it has, in its time, paid tax credits by mistake to the value of 4bn. The examples could be multiplied. The way taxpayers' money is wasted defies belief. It would not be tolerated in the private sector. The lessons must be learned.

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... new project management techniques are introduced

For the Prime Minister, the lesson is that performance needs to be improved:

... Then there is the argument that ID cards and the national register simply will not work. This rests largely on the past failures, which I accept exist, of IT projects of all governments. This, however, seems to me an argument not to drop the scheme but to ensure it is done well.

In a bid to improve performance over the years, the civil service have implemented several project management techniques.

The present technique requires the Office of Government Commerce (OGC), a department of the Treasury, to perform various gateway reviews of projects. According to the Information Commissioner, the OGC's gateway reviews of the ID cards scheme should be published.

Dematerialisation
Dematerialisation is the process by which objects in the social world tend towards intangibility. By objects I mean both property and also social relations. Property has become dematerialized in some contexts in a literal sense (for example in relation to bonds which are no longer issued in tangible form) and in other contexts by reference to the manner in which connections to property are distanced from traditional ownership (for example the lack of geographical connection between manufacturing corporations and the factories which produce their goods, see below).

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Social relations have become dematerialized in the literal sense that late modern society with its call centres, its internet purchasing, and its home-working frequently puts distance between human beings in fact requiring us to inter-act with computers and automated systems rather than with other human beings.

Social dematerialisation in the decline of manufacturing industry

On 16th July 2004, the Trades Union Congress (TUC) issued a report which suggested that 750,000 jobs had been lost in British manufacturing industry since Labour came to power in 1997. In the face of Gordon Browns policies of a University for Industry (which had slid into the background) and the regeneration of the availability of apprenticeships in skilled labour markets, it was somewhat disturbing to see that manufacturing industry was continuing to decline. Britain has ceased to make anything and has seen its expansion in the service industry and has floated its economic recovery on a runaway housing market and fiscal policy control. What this demonstrates is another phase in the dematerialization of our social and economic life. The jobs which people have are not concerned with manufacturing any evident product a car, a ship, a widget but rather in dealing with intangibles such as peoples payment obligations through call centres and so on. Dematerialization is the watchword of our times. The unbearable lightness of property is considered elsewhere on this site in detail.

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Dematerialisation of bonds and money

The dematerialisation of financial instruments and of money is a feature of a kind of postmodernism in financial activity. The dematerialization of money was evident in the development of telegraphic and then electronic payment systems which replaced the need for payments to be made in cash money. Rather than needing to transfer tangible payment in cash or in kind, payments are made instead in a dematerialized form. (Of course, there is an argument that cash money itself was a dematerialized form of barter whereby goods of a given value need not be transferred but rather an abstract substance money with an objective value could effect payment instead.) Similarly, over time, shares and bonds are no longer issued by means of physical certificates which represent the ownership of the instrument but rather are issued in dematerialized form and ownership is proved by entry of ownership on a register.

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Geojit Stock Trading / Geojit Demat / Geojit Brokerage

Incorporated in 1987, Geojit BNP Paribas (Geojit) is one of the major stock brokers based in India. Geojit is based in Kochi, Kerala and has the strong presence in Gulf. Geojit BNP Paribas is cash equity and derivatives broker with extensive experience in Portfolio Management Services and the distribution of financial products: mutual funds and life insurance.

Geojit provides stock trading at NSE and BSE stock exchanges through a strong network of around 500 branches and its state of art online trading portal. Geojit BNP Paribas is a stock market listed company and its stock are traded at NSE (GEOJIT) and BSE (532285). Over the years the name of the company got changed from Geojit Securities Ltd. to Geojit Financial Services Ltd. (GFSL) and finally to Geojit BNP Paribas Financial Services LTD in April 2009. Trade In: BSE and NSE

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Online Stock Trading Platforms:

Geojit BNP Paribas offers an Advanced Online Investment Platform called FLIP (Financial Investment Platform) that comes with multiple conveniences and flexibilities. Geojit BNP Paribas offers 3 different online trading platforms to its customers. Investor can select from any of the three trading platforms that Geojit BNP Paribas offers as per investors requirement.

2. FLIP Lite FLIP Lite is a browser based version and will help to trade even if someone have a low bandwidth connection. Its Light and easy to use. FLIP Lite is designed to work on mobile devices.

3. FLIP Gold Platform FLIP Gold Platform is a browser based version that can be accessed from around the world. This Platform is offered absolutely FREE to all online customers. FLIP Gold Platform is ideal for those who travel often and hence cannot access their own computer for trading.

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NRI Investment Terminology

FCNR: Foreign Currency Non-Resident Account. It is maintained in foreign Currency viz., US Dollar (USD), Pounds Sterling (GBP), Euro Currency (EUR) and Japanese Yen (JPY), but only as fixed deposits. The Principal and Interest earned thereon are repatriable. NRE Bank Account: Non-Resident External Account. Maintained in Indian Rupees, both in the form of savings bank and fixed deposit. Principal and Interest earned thereon are repatriable NRO Bank Account: Non-Resident Ordinary Account. Maintained in Indian Rupees, both in the form of savings bank and fixed deposit. Taxable under Indian Income Tax. Principal is not repatriable whereas interest earned thereon is repatriable, after payment of applicable taxes. Best suited for NRIs who have some sort of income accruing in India viz., Rental income, dividend etc. Can be maintained jointly with a resident Indian. Portfolio Investment Scheme (PIS): This is similar to the NRE/NRO savings a/c. The NRI can trade in the secondary stock market with Repatriation (from NRE PIS a/c) and on non-repatriation basis(from NRO PIS a/c). Demat a/c's can be opened with signatures of Power of Attorney (POA) FAQs for NRIs What is the classification of NRIs? How do I know if I classify as NRI? Non- Resident Indian means a person resident outside India who is a citizen of India or is a person of Indian origin Under the Foreign Exchange Management Act, 1999 [FEMA], a person who is NOT a person resident in India, as defined under Section 2 (v) of the Act is considered as a person resident outside India.

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Investment on non-repatriation basis can also be made by way of inward remittance or by debit to the NRE / FCNR / NRO accounts. The sale proceeds of the repatriable investments can be credited to the NRE / NRO accounts of the NRI / PIO at the option of the investor, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts. In case the nature of investment cannot be verified, the status of the scrip will have to be ascertained by referral to RBI. The sale of shares will be subject to payment of applicable taxes.

How to invest in India stock markets

For most NRI's the difficult part about knowing how to go about investing in the Indian stock markets is finding one place where they can get all the required information. To start off with, there is definitely quite an amount of paper work. For instance you would need to open bank accounts and complete other related formalities. But what investors prefer is to have an account with a good bank, open an account with a good stock broker and be comfortable that their funds are safe and that all trades would be executed fairly and transparently. So here are the basics on how an NRI could invest in the Indian stock markets Q. How do NRI's get started once they decide to invest in the Indian stock market? A: Firstly they need to open a bank account and decide whether they need to trade on a repatriable or a non repatriable basis. Now those who already have bank accounts should check with their bankers to find out whether those are suitable for stock trading. Know that you can nominate only one bank account for your stock trading. Some of the leading private banks are competent in this regard and can help you open an account through the internet that can be faster.

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Q: But isn't that cumbersome paper work? A: There is definitely some amount of paper work to be done. But if you download the application form from the bank's website it will be a lot faster. If you want to do it through the internet, you would have to get copies of your passport, may be some bank statements in original. But the advantage with bigger banks is that all such information would be available on the website so you would not have much of a problem.

DEMAT Account for Religious Deities

An interesting issue recently fell for the consideration of the Bombay High Court- whether DEMATS accounts could be held in the name of deities. The Court answered this question in the negative, relying on largely practical and partially moralistic reasons in coming to its conclusions. The decision was pronounced by a Division Bench of the Bombay High Court in Ganpati Panchayatan Sansthan Trust v. Union of India, on a writ petition filed against an order of the National Securities Depository Ltd. [NSDL], refusing to grant permission for the opening of a DEMAT account in the name of some deities. The petitioner was a private unregistered trust, of which the deities were shareholders.

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The primary contention of the petitioner was that the deities were artificial legal persons, and were recognised as such under Indian law and the Income tax Act. The Senior Counsel appearing for NSDL, Mr. Dwarkadas, contended that only natural persons could hold a DEMAT account, and that there was no provision which allowed an account to be opened in the name of a deity. However, disappointingly for those interested in the legal rationale adopted by the Court, the contentions of the respondent, and the decision of the Court accepting these contentions make little mention of any legal provision disallowing accounts in the name of artificial persons. Neither do they point out that a natural reading of the provision allowing for DEMAT accounts can extend it only to natural persons. The rationale adopted by the Court for holding the refusal by NSDL to be valid, and dismissing the writ petition rested primarily on three bases-

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(a) a DEMAT account requires regular monitoring, and personal skill, judgment and supervision, which cannot be done by an artificial entity. (b) since the petitioner is an unregistered private trust, in the case of an irregularity, neither the deity nor the trust will be held accountable; and (c) that the petition essentially amounted to bringing the Gods/Goddesses into share transaction business, which the Court frowned upon. Of these, the first two are clearly pragmatic considerations, while the third is one which reflects the Courts reluctance to allow the entry of religious deities into commercial transactions. However, by basing its decisions on these grounds, the Court leaves open the larger question of DEMAT accounts for non-religious entities, for which there may be better accountability mechanisms. Thus, while arguably reaching the appropriate conclusion on the facts of the case before it, the judgment does fall short in providing a legal framework for subsequent issues which may arise in similar fact scenarios.

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Demat Trading
Instead of signing the transfer deed as seller and delivering share certificates to a broker, you shall give your DP debit instruction when you sell your shares in the electronic form. You can trade through any broker of your choice registered with the stock exchanges connected with NSDL but will have to provide the details of your account with the DP. The money would be received from the broker/ paid to the broker in the same fashion as done in case of buying/ selling of physical shares. The DP will provide you a statement updated every fortnight giving details of your holdings. Shares bought in the electronic form can be pledged/ hypothecated by making application to the DP in the prescribed form. For the purpose of calculation of capital gains tax, the cost of acquisition of shares would be determined on the principle of first in first out. The process of opening an account with a DP is similar to the opening of bank account. Photograph, Introduction and signing the prescribed agreement form are some of the requirements. If there are any discrepancies in your holdings statement or pass book entries, you can contact your DP. If the problem cannot be resolved at DP end, you can approach NSDL. There is absolutely no restriction to the number od DPs you can open accounts with. Just as you can have savings or current accounts with more than one bank, you can open accounts with more than one DP.

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Demat Process
A request form together with the share certificates desired to be dematerialized is given to the DP. He sends the request along with the share certificates to the company/ registrars through NSDL for confirmation of its genuineness. After checking the records, the registrar will destroy the certificates and sends confirmation of dematerialization to NSDL NSDL then confirms the dematerialization of shares to your DP to credit the holding of shares in your account electronically. This takes about 15 days from the date of request. Electronic holdings can be converted back into certificates, if so desired, in a similar fashion as that for dematerialization.

Benefits of Demat
In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the dangers related to handling of paper. NSDL provides numerous direct and indirect benefits, like: elimination of bad deliveries In the depository environment, once holdings of an investor are dematerialized, the question of bad delivery does not arise i.e. they cannot be held "under objection". Statistically, in the physical environment, about 20% of delivered stock constitutes bad deliveries. Of these, about 1% is ultimately absorbed by the system as bad delivery cost.

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Rectification of objection usually involves extensive follow up by the investor. Also, the investor cannot sell the securities till they are registered. This means that in the physical environment, every fifth person taking delivery of stock gets securities, the genuineness to which there is a doubt whereas he parts with genuine funds.

elimination of all risks associated with physical certificates Dealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates and advertisements, etc. This problem does not arise in the depository environment. no stamp duty for transfer of equity instruments & units of mutual funds in the depository (In case of physical shares, stamp duty of 0.5% is payable on transfer of shares).

immediate transfer and registration of securities In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration. Having purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of ownership can be registered. This process usually takes around three to four months and is rarely completed within the statutory framework of two months thus exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit. To overcome this, the normally accepted practice is to hold the securities in street names i.e. not to register the change of ownership. However, if the investors miss a book closure the

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securities are not good for delivery and the investor would also stand to loose his corporate entitlements.

faster settlement cycle The exclusive demat segments follow rolling settlement cycle of T+5 i.e. the settlement of trades will be on the 5th working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor.

pay in & pay out of securities & funds is on the same day for scripless trades In the exclusive demat segments the settlement of trades (both securities and funds) is on the 5th working day from the trade day. This means that a buyer, who parts with funds on the 5th working day, gets the securities on the same day evening and a seller who parts with securities on the 5th working day gets funds on the same day evening. This reduces the funding cost of 5-6 for a broker (in case of institutional trades) that they have to bear in the physical segment. In the physical segment, the settlement period is spread over a period of three to four days. Faster disbursement of non cash corporate benefits like rights, bonus, etc. NSDL provides for direct credit of non cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit

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 reduction in rate of interest on loans granted This benefit is provided by some banks against pledge of dematerialized securities as dematerialized securities eliminates the following hassles/ risks: getting securities registered in their name at the time of book closure and risk of stocks coming under objections when they are send to the company's registrar for registration if the pledge defaults in repayment.

Increase in maximum limit of advances from Rs. 10 lakh to Rs. 20 lakh per borrower and reduction in minimum margin from 50% to 25% by banks for advances against dematerialized securities as per the Monetary and Credit Policy for the first half of 1998-99 announced by the Reserve Bank of India.

reduction in brokerage of 0.25% to 0.5% by many brokers for trading in dematerialized securities - Brokers provide this benefit to investors as dealing in dematerialized securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker. reduction in handling of huge volumes of paper periodic status reports to investors on their holdings and transactions, leading to better controls

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The Relevance of the Depository System in India to Non Resident Indians

The risks and cost associated with dealing in the physical form has always been very high for the NRI investors. The depository system, which allows the investor to hold securities in an account and to transfer theses securities by means of account transfers provides an efficient solution to these problems and substantially removes the inconveniences due to geographical distances. Acquiring, holding and disposal of securities in Indian Capital Market by Non Resident Indians (NRI) and overseas corporate bodies (OCB) either on repatriable basis or on no-repatriable basis is governed by RBI guidelines and Foreign Exchange Regulation Act (FERA). As per these, approvals are required for buying and selling of securities in most of the cases. Details regarding the procedures may be available with the designated bank branch through which foreign exchange is handled or with the broking members who normally deal for these segments of investors.

Operational issues pertaining to depository operations:

Specific issues with respect to opening and operating depository accounts are as given below:

In the depository system, with respect to the status of investments, the only difference is the form in which the securities are dealt. As it does not alter investment activities per se, there is no need for any special approvals to open or operate a depository account. The account can be opened by the person or by his/her power of attorney holder provided the POA has the necessary authorizations

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At the time of dematerialisation of any securities into these accounts, the account holder should hand over to his DP, copies of RBI approvals obtained at the time of acquiring these securities. If these securities were acquired under schemes which does not require special approval from RBI by the acquirer, then no approval letter is needed. (For e.g. when shares are issued to NRI in public issues, RBI gives a general approval to the issuing companies and the investor need not take any separate approval.) When securities are to be debited from the account, the account holder should provide a copy of the relevant RBI approval for sale of securities to the DP. When securities are to be credited to the account, the account holder should provide a copy of the relevant approval for purchase of securities to the DP. If the same approval is applicable to multiple

Statutory objectives:
The Financial Services and Markets Act imposed five statutory objectives upon the FSA:

market confidence: maintaining confidence in the financial system; public awareness: promoting public understanding of the financial system; financial stability: contributing to the UK's financial stability; consumer protection: securing the appropriate degree of protection for consumers; and reduction of financial crime: reducing the extent to which it is possible for a business carried on by a regulated person to be used for a purpose connected with financial crime

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Regulatory principles:
The statutory objectives are supported by a set of principles of good regulation which the FSA must have regard to when discharging its functions. These are:

efficiency and economy: the need to use its resources in the most efficient and economic way.

role of management: a firms senior management is responsible for its activities and for ensuring that its business complies with regulatory requirements. This principle is designed to guard against unnecessary intrusion by the FSA into firms business and requires it to hold senior management responsible for risk management and controls within firms. Accordingly, firms must take reasonable care to make it clear who has what responsibility and to ensure that the affairs of the firm can be adequately monitored and controlled.

proportionality: The restrictions the FSA imposes on the industry must be proportionate to the benefits that are expected to result from those restrictions. In making judgements in this area, the FSA takes into account the costs to firms and consumers. One of the main techniques they use is cost benefit analysis of proposed regulatory requirements. This approach is shown, in particular, in the different regulatory requirements applied to wholesale and retail markets.

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innovation: The desirability of facilitating innovation in connection with regulated activities. For example, allowing scope for different means of compliance so as not to unduly restrict market participants from launching new financial products and services.

international character: Including the desirability of maintaining the competitive position of the UK. The FSA takes into account the international aspects of much financial business and the competitive position of the UK. This involves co-operating with overseas regulators, both to agree international standards and to monitor global firms and markets effectively.

competition: The need to minimise the adverse effects on competition that may arise from the FSA's activities and the desirability of facilitating competition between the firms it regulates. This covers avoiding unnecessary regulatory barriers to entry or business expansion.

Competition and innovation considerations play a key role in the FSA's cost-benefit analysis work. Under the Financial Services and Markets Act, the Treasury, the Office of Fair Trading and the Competition Commission all have a role to play in reviewing the impact of the FSA's rules and practices on competition.

Accountability and management

The FSA is accountable to Treasury Ministers, and through them to Parliament. It is operationally independent of Government and is funded entirely by the firms it regulates through fines, fees and compulsory levies. Its Board consists of a Chairman, a Chief Executive Officer, a Chief Operating Officer, two Managing Directors, and 9 nonexecutive directors (including a lead non-executive member, the Deputy

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Chairman) selected by, and subject to removal by, HM Treasury. Among these, the Deputy Governor for Financial Stability of the Bank of England is an 'ex officio' Board member. This Board decides on overall policy with day-to-day decisions and management of the staff being the responsibility of the Executive. This is divided into three sections each headed by a Managing director and having responsibility for one of the following sectors: retail markets, wholesale and institutional markets, and regulatory services. Its regulatory decisions can be appealed to the Financial Services and Markets Tribunal. HM Treasury decides upon the scope of activities that should be regulated, but it is for the FSA to decide what shape the regulatory regime should take in relation to any particular activities. The FSA is also provided with advice on the interests and concerns of consumers by the Financial Services Consumer Panel. This panel describes itself as "An Independent Voice for Consumers of Financial Services". Members of the panel are appointed and can be dismissed by the FSA and emails to them are directed to FSA staff. The Financial Services Consumer Panel will not address individual consumer complaints.

Retail consumers:
The FSA has a priority of making retail markets for financial products and services work more effectively, and so help retail consumers to get a fair deal. Over several years, the FSA has developed work to raise levels of confidence and capability among consumers. Since 2004, this work is described as a national strategy on building financial capability in the UK. This programme is comparable to financial education and literacy strategies in other OECD countries, including the United States. In June 2006, the FSA created its Retail Distribution Review (RDR) programme to help enhance consumer confidence in the retail investment market. To this end, RDR supports clear education of consumers about different types of services available,

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improved professional standards in the industry, and clear, fair practices in remuneration for financial advice. The RDR has a target for fullimplementation of 31 December 2012.

2009 regulations:
Major regulations were introduced in 2009. The Payment Services Regulations 2009 came into force on 1 November 2009 and shifted the onus onto the banks to prove negligence by the holder of debit and credit cards in cases of disputed payments.. The FSA said "It is for the bank, building society or credit card company to show that the transaction was made by you, and there was no breakdown in procedures or technical difficulty" before refusing liability. On the same date the Banking Conduct Regime commenced. It applies to the regulated activity of accepting deposits, and replaces the non-lending aspects of the Banking Code and Business Banking Code (industry-owned codes that were monitored by the Banking Code Standards Board).

Activities regulated:
Companies involved in any of the following activities must be regulated by the FSA.

Accepting deposits Issuing e-money Effecting or carrying out contracts of insurance as principal Dealing in investments (as principal or agent) Arranging deals in investments Arranging regulated mortgage contracts Arranging regulated home reversion plans Arranging regulated home purchase plans Managing investments Assisting in the administration and performance of a contract of insurance Safeguarding and administering investments

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Sending dematerialized instructions Establishing etc collective investment schemes Establishing etc personal pension schemes Establishing etc stakeholder pension schemes Advising on investments Advising on regulated mortgage contracts Advising on regulated home reversion plans Advising on regulated home purchase plans Lloyd's market activities Entering into and administering a funeral plan

Since January 14, 2005 The FSA ( Financial Services Authority) have also been regulating the Motor Industry, applicable when insurance products have been sold in conjunction with the vehicle purchase. This regulation now covering some 5,000 Motor Dealers has focused heavily on the FSA's "Treating Customers Fairly" principles that should be representative of the Motor Dealers trading style.

Actions relating to the 20072009 credit crisis:

This section requires expansion. The FSA has been held by some observers to be weak and inactive in allowing irresponsible banking to precipitate the credit crunch which commenced in 2007, and which has involved the shrinking of the UK housing market, increasing unemployment (especially in the financial and building sectors), the public acquisition of Northern Rock in mid-February 2008, and the takeover of HBOS by Lloyds TSB. On the 18th of September 2008, the FSA announced a ban on short selling to reduce volatility in difficult markets lasting until January 16, 2009. Certainly, the FSA's implementation of capital requirements for banks has been lax relative to some other countries. For example, it has been reported that Australia's Commonwealth Bank is measured as having 7.6% Tier 1 capital under the rules of the Australian

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Prudential Regulation Authority, but this would be measured as 10.1% if the bank was under the jurisdiction of the FSA.

In March 2009, Lord Turner published a regulatory review of the global financial crisis. The review broadly acknowledges that 'light touch' regulation has failed and that the FSA should concentrate on macroeconomic regulation as well as scrutinising individual companies. The review also proposes cross-border regulation of banks. There are no further promises to improve consumer protection or to directly intervene against financial institutions who treat their customers badly. The review was reportedly met with widespread relief in the city of London where firms had feared a 'revolution' in the way that they would be regulated.

Criticism
The neutrality of this section is disputed. Please see the discussion on the talk page. Please do not remove this message until the dispute is resolved. (October 2009) The FSA rarely takes on wider implication cases. For example, thousands of consumers have complained to the Financial Ombudsman Service about payment protection insurance (PPI) and bank charges. However, despite determining that there was a problem in the selling of PPI, the FSA has taken effective action against very few firms in the case of PPI and it was the Office of Fair Trading (OFT) that finally took on the wider implications role in the case of bank charges. The FSA and the FOS have staff placed within their co-organization in order to advise on

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wider implication issues. It is surprising, therefore, that so little action has taken place.

The FSA in an internal report into the handling of the collapse in confidence of customers of the Northern Rock Plc describe themselves as inadequate. It is reported that in order to prevent such a situation occurring again, the FSA is considering allowing a bank to delay revealing to the public when it gets into financial difficulties. The FSA was criticized in the final report of the European Parliament's inquiry into the crisis of the Equitable Life Assurance Society. It is widely reported that the long awaited Parliamentary Ombudsman's investigation into the government's handling of Equitable Life is equally scathing of the FSA's handling of this case. The FSA ignored warning signals from Northern Rock building society and continued to allow the bank to operate without a risk mitigation programme for months before the bank's collapse. The FSA has been criticized by some within the IFA community for increasing fees charged to firms and for the perceived retroactive application of current standards to historic business practices. FSA regulation is also often regarded as reactive rather than proactive. In 2004-05 the FSA was actively involved in crackdowns against financial advice firms who were involved in the selling of split-cap investment trusts and precipice bonds, with some success in restoring public confidence. However, despite heavily criticizing split-cap investment trusts, in 2007 it suddenly abandoned its investigation. Where it has been rather poorer in its remit is in actively identifying and investigating possible future issues of concern, and addressing them accordingly. There have also been some questions raised about the competence of FSA staff. The composition of the FSA board appears to consist mainly of representatives of the financial services industry and

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career civil servants. There are no representatives of consumer groups. As the FSA was created as a result of criticism of the self-regulating nature of the financial services industry, having an independent authority staffed mainly by members of the same industry could be perceived as not providing any further advantage to consumers.

Although one of the prime responsibilities of the FSA is to protect consumers, The FSA has been active in trying to ensure companies' anonymity when they have been involved in misselling activity, preferring to side with the companies that have been found guilty rather than consumers. premiums for mortgage endowment policies. This miscalculation led to massive consumer detriment as well as vast and unquantifiable costs for the advisers who unwittingly sold these products. The FSA has steadfastly refused to publicly name the miscreant companies and has spent 100,000s on legal fees to baulk the efforts of the Information Commissioner who had concluded that naming the companies would be in the public interest. It was announced in November 2008, that despite self-acknowledged failures by the FSA in effectively regulating the financial services industry, FSA staff would receive bonuses. On May 31, 2008, The Times confirmed that FSA staff had received 20m in bonuses for 2008/09, a 40% increase on the previous year. On 11 February 2009, FSA deputy chairman, Sir James Crosby resigned after it was revealed that he had fired a whistleblower, Paul Moore, who had warned of dangerous lending practices at HBOS when he had been in charge of risk regulation. Lord Adair Turner, current FSA chairman defended the actions of the regulator on the BBC's Andrew Marr show on 13 February 2009. His comments were that other regulatory bodies throughout the worlds, which had a variety of different structures and which are perceived either as heavy touch or light touch also failed to predict the economic collapse. In line with the other regulators, the FSA had failed

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intellectually by focusing too much on processes and procedures rather than looking at the bigger economic picture. In response as to why Sir James Crosby had been appointed deputy chairman when his bank HBOS had been highlighted by the FSA as using risky lending practices, Lord Turner said that they had files on almost every financial institution indicating a degree of risk. Turner faced further criticism from the Treasury Select Committee on 25 February 2009, especially over failures to spot or act on reckless lending by banks before the crisis of 2008 occurred. He attributed much of the blame on the politicians at the time for pressuring the FSA into "light touch" regulation.

More principles-based regulation:

There were suggestions that the FSA stifles the UK financial services industry through over-regulation, following a leaked letter from Prime Minister Tony Blair during 2005. This incident led Callum McCarthy, then Chief Executive of the FSA, to formally write to the Prime Minister asking him to either explain his opinions or retract them. The Prime Minister's criticisms were viewed as particularly surprising since the FSA's brand of light-touch financial regulation has typically been popular with banks and financial institutions in comparison with the more prescriptive rules-based regulation employed by the US Securities and Exchange Commission and by other European regulators; by contrast, most critiques of the FSA accuse it of instigating a regulatory "race to the bottom" aimed at attracting foreign companies at the expense of consumer protection. The FSA counters that its move away from rulesbased regulation towards more principles-based regulation, far from weakening its consumer protection goals, can in fact strengthen them: "Our Principles are rules. We can take enforcement action on the basis of them; we have already done so; and we intend increasingly to do so where it is appropriate to do so."[As an example, the enforcement action taken in late 2006 against firms mis-selling payment protection insurance was based on their violation of principle six of the FSA's Principles for Business, rather

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than requiring the use of the sort of complex technical regulations that many in financial services find burdensome.

Enforcement cases:
The FSA has been attacked for its supposedly weak enforcement program. For example, while FSMA prohibits insider trading, the FSA has only successfully prosecuted two insider dealing cases, both involving defendants who did not contest the charges. Likewise, since 2001, the FSA has only sought insider trading fines eight times against individuals and companies it regulates, despite the FSA's own studies indicating that unexplained price movements occurs prior to around 25 percent of all UK corporate merger announcements. After the HBOS Insider trading scandal, The FSA informed MPs on 6 May 2008 that they planned to crack down on inside trading more effectively and that the results of their efforts would be seen in 2008/09 On 22 June, the Daily Telegraph reported that the FSA had wrapped up their case into HBOS insider trading and no action would be taken. On 26 June, the HBOS Chairman said that "There is a strong case for believing that the UK is exceptionally bad at dealing with white-collar crime". On 29 July 2008, however, it was announced that the Police, acting on information supplied by the FSA, had arrested workers at UBS and JP Morgan Cazenove for alleged insider dealing and that this was the 3rd case within a week. A year after the subprime mortgage crisis had made global headlines; The FSA levied a record 900,000 on an IFA for selling subprime mortgages.

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Planned abolition of the Financial Services Authority:

On June 16, 2010, the Chancellor of the Exchequer, George Osborne, announced plans to abolish the FSA and separate its responsibilities between a number of new agencies and the Bank of England. The Consumer Protection and Markets Authority will be responsible for policing the City and the banking system.[4] A new Prudential Regulatory Authority will carry out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies.[4] All other responsibilities will be assumed by the Bank of England which will establish a Financial Policy Committee. The transition is expected to be completed by 2012 and existing FSA chief executive Hector Sants will continue in this role and will oversee the process.

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ANNEXURE
QUESTIONNAIRE 1. Personal detail

Name:________________________ Age__________________________ Phone No._____________________ Email.________________________ Office Address: - _______________ Residential Address: -____________

2. Do you think is it essential to have demat a/c?

YES

NO

3. Which are the companies you invested your money for demat a/c?

a) Equity b) Commodity

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