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CS Executive · Capital Market and Securities Laws · Laws Governing Depositories and Depository Participants

A depository wants to frame rules on the manner and procedure for dematerialisation of securities. Under the Depositories Act, 1996, how must this be done?

The depository must provide for it in its bye-laws, made with SEBI's previous approval. Section 26 requires bye-laws consistent with the Act and regulations, and specifically lists the manner and procedure for dematerialisation of securities among the matters they must cover.

  1. AThrough bye-laws made with the previous approval of SEBICorrect
  2. BThrough bye-laws made without any approval, since the depository is autonomous
  3. CThrough directions issued by the issuer company
  4. DThrough an agreement between participants alone

Explanation

Section 26(1) requires a depository to make bye-laws, consistent with the Act and regulations, with the previous approval of the Board. Section 26(2)(d) lists the manner and procedure for dematerialisation among the matters the bye-laws must cover. The no-approval option is wrong because approval is required.

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