Mass shifting facility

A DP starts small, often running all its accounts from one office. Clients from surrounding towns open accounts at that office. As business grows, the DP opens a centre in one of those towns with its own direct connection to the depository.

Now the DP has a problem: hundreds of accounts belonging to that town's clients are still set up on the old office's system. Closing and reopening each one would be slow and would burden clients.

The mass shifting facility solves it. The depository lets the DP move all those accounts, in bulk, to the new centre's system. It is part of the workbook's section on shifting of accounts, which also covers what happens when an individual client moves all his securities to another branch, another DP or the other depository.

From Chapter 4 (section 4.5.5, Mass Shifting of Accounts):

Mass shifting. DPs may set up new centres as business expands, or to give direct connectivity from different locations, while accounts from that location sit on another DP module machine. The workbook's example: a DP operating from Delhi serves clients in Faridabad, Agra and Mathura; when business in Mathura justifies it, the DP sets up a direct connectivity machine there, and depositories let it shift all the Mathura accounts from Delhi in mass. This is the mass shifting facility.

Shifting by a client - no charges. SEBI decided in 2006 that no charges are levied by the depository on the DP, or by the DP on the BO, when a BO transfers all securities to another branch of the same DP, another DP of the same depository, or another depository, provided the accounts at transferee and transferor DPs are identical in all respects (joint accounts in the same sequence).

Procedure:

1. Client submits an account closure request with a certified Client Master Report of the target account (physical signed and stamped, or digitally signed). For inter-depository moves, a CMR in crystal format certified by the target DP, or target details certified by the other depository.
2. DP verifies and transfers the securities.
3. Unused DIS serial numbers are permanently blocked and the account is closed. If closure is not possible (pending demat/remat, suspended ISIN, fractional position, open pledges), the account is frozen - "suspended for debit and credit" in NSDL; in CDSL it becomes "To be closed".
4. DP asks the depository for credit of transaction fees for such closures. In CDSL, no charges if done through the Transfer module. In NSDL, closures to an NSDL target go through the "Transfer of Holding" module; a waiver application is needed only for inter-depository shifting and transfers to legal heirs/nominees.

NSDL Transfer of Holding module also moves matured securities if PAN flags are enabled and matching in the same holding pattern, the ISIN is Active or Suspended, and the target has standing instructions; pending demat/remat, pledge balances, blocked IDTs and quantity-level freezes are rejected and stay behind.

Illustrative.

The DP's mass shift. Sangam Securities runs its DP operations from Pune and has 1,850 accounts of clients in Satara. It opens a Satara centre with direct connectivity. Rather than closing and reopening each account, it uses the mass shifting facility to move all 1,850 accounts from the Pune module to the Satara module.

A client's own shift. Separately, Sangam's client Vandana (joint account: Vandana, then Mohan) is moving everything to another DP of the same depository.

Sangam transfers the 900 free shares and blocks Vandana's unused DIS serial numbers. Because the 200 pledged shares remain, it cannot close the account; it freezes it as suspended for debit and credit (in CDSL it would show "To be closed") until the pledge is closed and the shares can follow.

If the new account had been Mohan, then Vandana, it would not be identical, and the no-charges treatment would not apply.

Chapter 4 (Functions of DP - Account Opening, 12% weightage) covers account closure, closure by the DP, shifting of clearing accounts and, in section 4.5.5, mass shifting of accounts with SEBI's 2006 no-charges rule and the NSDL Transfer of Holding module. Questions test what mass shifting is for, the conditions for free transfer of all holdings (identical accounts, same joint-holder order), the certified CMR requirement, and what happens when an account cannot be closed.

• Mass shifting is initiated by the DP to move many accounts to a new DP module/centre; it is not a client's closure request.
• No charges only if the source and target accounts are identical in all respects, including joint-holder sequence.
• Certified CMR of the target account is required; crystal format for inter-depository.
• Unused DIS serial numbers must be permanently blocked.
• Can't close? Freeze - "suspended for debit and credit" in NSDL, "To be closed" in CDSL.
• Open pledges, pending demat/remat, suspended ISINs and fractional positions stop closure.
• NSDL waiver application is needed only for inter-depository shifting and transfers to legal heirs/nominees.