30-Aug-2022
2 mins read
SEBI implements DDPI effective from Sep 1, 2022
The Government Authorities of India closely regulate Financial Markets. Investors of various stature engage themselves in the financial markets to build wealth and accomplish financial objectives. Investors now have more options than ever thanks to various existing financial products and new ones being developed.
However, every investment has a certain amount of risk, and the financial markets need to be closely monitored to weed out deceptive products and promotions around the financial tools. The Securities and Exchange Board of India (SEBI) has implemented a few general rules and regulations regarding the overall operation of stock markets in India in an effort to make the stock market safer. SEBI consciously analyses, updates, and modifies these regulations to ensure the investors’ securities’ safety.
We’ll look at SEBI’s recent initiative introduced to safeguard investors’ Interests.
SEBI has introduced a new process. called Demat Debit and Pledge Instruction (DDPI), effective from September 1, 2022. DDPI has replaced Power of Attorney (PoA) to pledge and repledge stocks for the objective of margin calls.
Clients can explicitly authorize the stock broker and depository participant to access their beneficial owners’ accounts through DDPI to settle the trades they perform to fulfil pay-in obligations.
Clients have two options for completing the settlement:
- Either they can use DDPI
OR
- Issue their own physical Delivery Instruction Slip (DIS) or electronic Delivery Instruction Slip (EDIS).
However, they will remain valid until the client nullifies the existing POAs. Therefore, if the customer declines to execute DDPI, the stockbroker and depository participant will not directly or indirectly pressurize the client to sign DDPI or refuse to provide services to the client. The clients can digitally sign the document, which should be duly stamped.
How are DDPI Safe and Secure for investors?
- DDPI will limit debiting shares without a sell trade from a
client’s account for secondary market transactions.
- It will prevent the risk of breaking clauses and pledging or
re-pledging of securities.
How does DDPI cause Ease of Trading?
- SEBI introduced DDPI to streamline the procedure and increase transparency.
- DDPI has curbed the process of collecting E-Dis from investors.
- DDPI has replaced physical documentation with an online process.
According to SEBI, depositories must verify and match the transfer of securities with a client-specific net delivery obligation resulting from a trade performed on the exchange, as notified to depositories by the Clearing Corporation for each settlement date. The DDPI will be executed to fulfil delivery/settlement obligations before completing the actual transfer of securities based on information provided by the stockbroker and depository participant.
The DDPI shall be registered in the client Demat account by Trading Member (TM) or Clearing Member (CM). The securities provided by the client will be credited only to their trading member pool account based on the DDPI submitted by them.
SEBI Widens DDPI Scope
Sebi widened the scope of Demat Debit and Pledge Instruction (DDPI) by including mutual fund transactions, order entry platforms, and tendering of shares in open offerings through the stock exchange. The government body’s initiative will be effective from November 18.
The DDPI accomplishes the same goal as PoA and considerably reduces PoA misuse.
Following are the steps to enable DDPI
- Enable DDPI by entering the client code
- Enter a 6-digit verification code
- Select the Transaction options to confirm e-sign
