The depositary is a professional participant in the stock market. Its main purpose is to store certificates of shares and other securities and keep records of the transfer of rights to them when making transactions.
What is a depository and what functions does it perform
Most often, a depository is understood as bank deposit boxes, handed over by the bank to its customers for storing valuables. However, it is more correct to speak of a depository as a participant in the securities market. There are several types of depositories, each of which performs specific functions.
In accordance with the provisions of Federal Law No. 39-FZ "On the Securities Market", depository activities are professional activities in the stock market. A professional participant in the securities market performing depositary activities is called a depository. Only a legal entity can obtain the status of a depositary, as well as a corresponding license to conduct such activities.
Thanks to the depositary, it becomes possible to conduct transactions on the market without making changes to the register of shareholders each time. The investor should declare his desire to exercise the following rights provided by the security:
- participation in the meeting of shareholders,
- receiving coupon payments,
- receiving dividends.
Upon receipt of the client's order, the depositary performs the appropriate procedures, interacts with the financial institution responsible for maintaining the register.
When purchasing shares for a client, a separate account is set up in the depository in his name, where all his securities will be listed, being both under the account and under protection. Moreover, such records, which contain all securities belonging to a legal entity or an individual, can be either in paper form or in electronic form.
What are the types of depositories
In Russia, about half a million financial institutions are licensed to professionally participate in the rapidly expanding securities market. Ratings of the most reliable and largest depositories are made annually, based on the total value of the securities in their custody. The highest degree of reliability is marked with the letters "AAA".
Depositaries are divided into different types according to their purpose and functions.
Settlement depository
The settlement depository is a subject of the securities market and performs settlements on transactions made on it. The depository activity of a legal entity is a separate line of work, but it can be combined with other activities.
The settlement depository in its activities is based on the rules of accounting. This instruction is the basis for obtaining a license and is developed by the entity itself. The rules of the instruction describe the procedure for conducting depository operations, the procedure for accounting for personnel, the procedure for fulfilling client orders and other features of the depository's work.
The activities of a settlement depository are classified as follows:
- Administrative work, which includes operations related to the adjustment of questionnaires on securities accounts, data of accounting registers and other information, with the exception of balances and the value of securities.
- Information functions - development of reports on securities accounts, provision of current information on operations and generation of reports.
- Inventory activity includes operations related to the change of the owner of the account and the display of actions taken in this regard on securities accounts.
- Global actions based on the issue of securities, resulting in a change in the state of accounting registers.
Central depository
The Central Securities Depository controls the entire stock market of securities and makes all financial settlements in Russia or in some particular region. Similar depositories are being opened both abroad and in the Russian Federation. The central status is assigned according to various criteria to the only legal entity in the country or region with a license to operate a depository.
In Russia, the central depository was established in 2012 in Moscow. It was the National Settlement Depository CJSC, which operates in the Moscow Exchange Group. This organization provides an impressive list of services for both Russian and foreign bidders. The company confirms its status by reliable and stable work, backed by significant financial reserves.
This financial institution deals with transactions on the securities accounts of clients-holders of securities when these participants carry out transactions through a variety of organizers of trading in the securities market. That is, in other words, the central securities depository performs operations when trading on the stock exchange.
The reason for the emergence of the institution of the Central Securities Depository was the rapidly growing volume of transactions with clients' securities. In addition, problems emerged with the accounting and storage of financial documents. Therefore, on the recommendation of a group of international experts, measures were taken to improve settlement systems in exchange trading.
The experts' recommendations included, among other things, a proposal to form a structure that would transfer financial market instruments into electronic form. This structure is called the Central Securities Depository.
The main task of the structure was to transfer all types of assets into electronic form, a number of securities remained in the form of an electronic record on the depo account, that is, dematerialization took place. But some of the assets were preserved in paper form in the vault of the central securities depository organization. However, the rights to them are already confirmed by the owner's depo account, that is, we can talk about immobilization.
The Central Securities Depository has the widest possible list of instruments for which securities accounts are opened. If this structure opens in a certain region, it is responsible for operations in its stock market.
Specialized depository
A specialized depository is a limited liability company or a joint stock company established in accordance with the legislation of the Russian Federation and obtained a license to conduct depository activities, a license to operate unit investment funds, a specialized depository of investment funds and non-state pension organizations.
Licensing of depository activities and the activities of specialized depositories of investment funds, mutual investment and non-state pension funds is carried out by the Federal Service for Financial Markets in full compliance with legislative and other regulatory legal acts developed in the securities market. In particular, these include the following documents:
- Regulations on licensing the activities of specialized depositories of investment funds, mutual investment and non-state pension funds, approved by Decree of the Government of Russia No. 384.
- The procedure for licensing types of professional activities in the securities market of the Russian Federation, approved by the Resolution of the Federal Commission for the Stock Market No. 10.
- One of the leading documents regulating the working activities of such a financial organization as a specialized depository is the Regulation on the activities of specialized depositories of joint-stock investment funds developed by experts.mutual investment funds and non-state pension funds.
The last document was approved by a special resolution of the Federal Commission for the Stock Market of Securities No. 04-3 / ps dated 10.02.2004.
What a securities depository can do
By order of the client, the securities depository is obliged to perform basic operations with securities, as well as a number of additional ones:
- storage and accounting of certificates;
- crediting the client with income from securities (dividends);
- purchase and sale of securities;
- donation of assets;
- transfer of securities to other depositories or registries;
- receiving, at the request of the owner of the securities account, reports on their savings and dividends.
In addition, securities can be used as collateral. Then the depository performs operations related to the imposition and removal of encumbrances from securities.
