Rights and Obligations document
The document a DP must hand every client, and get an acknowledgement for, before acting for them — its form and content set jointly by SEBI and the DP's own Operating Instructions.
In plain language
A DP cannot simply start acting for a new client. Before anything else happens, it must hand over one specific paper: the Rights and Obligations document. The client has to acknowledge receiving it, and the DP keeps that acknowledgement on record.
The document sets out what each side can expect from the other. A DP still remains the depository's own agent even while it serves the client — so it stays personally liable to the client for its own acts and mistakes throughout.
How it works
From Chapter 2, section 2.4(a), and Chapter 3, section 3.1.6: the Rights and Obligations document must be provided, and an acknowledgement obtained, before the DP acts as a Participant for the client. Its form and manner are specified by SEBI and the DP's Operating Instructions together — not by the Bye-Laws alone.
Two named exceptions need no Rights and Obligations document at all: (a) a SEBI-registered FPI that has entered an agreement with the DP, directly or through a power of attorney, and has already filed that agreement with SEBI; and (b) an International Multilateral Agency under Regulation 17 of the SEBI (Custodian of Securities) Regulations, 1996, where the same entity acts as both custodian and DP.
The document was formerly split into a separate "Beneficial Owner–Depository Participant Agreement," replaced by this single common document under SEBI Circular Ref. No. MIRSD/12/2013, dated 4 December 2013. It is also where the Standing Instruction clause lives — the client's one-time authorisation letting the DP accept credits without a fresh instruction each time.
A worked example
Rohit Enterprises opens a demat account with a CDSL DP on 4 March 2025. Before doing anything else, the DP hands Rohit a copy of the Rights and Obligations document and keeps Rohit's signed acknowledgement on file — only after that does it accept Rohit's account opening form.
Contrast this with GreenLeaf Capital, a SEBI-registered FPI operating through the same DP under a power-of-attorney agreement already filed with SEBI. Because that agreement is already on record with SEBI, the DP need not separately issue GreenLeaf a Rights and Obligations document at all.
Why NISM asks about it
Chapter 2, section 2.4(a), and Chapter 3, section 3.1.6, both require this document. Expect a question on the two named exceptions — a filed FPI agreement, and an International Multilateral Agency acting as custodian-cum-DP — and on who jointly specifies its form and content.
Common exam traps
- The document's form and content trace to SEBI and the Operating Instructions together, not the Bye-Laws alone.
- The two exceptions are narrow: a filed FPI agreement, or an IMA's dual custodian-DP role — not every FPI is exempt.
- Even acting as the depository's agent, the DP stays personally liable to the client for its own acts and deeds.
Check yourself
1.The Rights and Obligations document is a standard document whose form and contents are specified by:
- a)RBI
- b)SEBI
- c)The Department of Company Affairs
- d)The individual DP
Show the answer
Answer: (b) SEBI
The form and contents of the Rights and Obligations document are specified by SEBI and DP Operating Instructions of the depository in which the DP is registered.
And again: the standard format of the Rights and Obligation document is provided by SEBI and forms a part of the depository participant operating instructions.
What it does: the Rights and Obligation document sets out in contractual form the nature of services to be provided, rights and obligations of the DP as well as the client, and the fees/charges payable for the services.
How it is executed: the Rights and Obligation document and the acknowledgement needs to be made on a plain paper and has to be signed by (a) Sole holder in case of single holding; or (b) All joint holders in case of joint holding, or (c) Constituted attorney (authorised signatories) in the case of corporate/registered trust accounts.
The investor's obligation: the investor while opening an account has to submit an acknowledgement of receipt of the copy of the Rights and Obligations document to the DP.
One exemption: FPI clients registered with SEBI and who have entered into an agreement with the DP directly or through their constituted attorney, are not required to submit acknowledgement of Rights and Obligations document.
And a useful detail: the schedule of fees to be charged by the DP to the Client should form a part of the Rights and Obligation document.
It also carries the standing instruction clause that enables clients to give standing instructions to DPs, at the time of opening the account itself, for receiving securities to the credit of their accounts.
2.Sunil, Kavya and Dev Rao hold a joint demat account. Who must sign the Rights and Obligations document and its acknowledgement?
- a)Only Sunil, as the first holder
- b)All joint holders — Sunil, Kavya and Dev
- c)Sunil and Kavya, as the first two holders
- d)A constituted attorney appointed by the three holders
Show the answer
Answer: (b) All joint holders — Sunil, Kavya and Dev
Section 4.3.5 states: "The Rights and Obligation document and the acknowledgement needs to be made on a plain paper and has to be signed by: (a) Sole holder in case of single holding; or (b) All joint holders in case of joint holding, or (c) Constituted attorney (authorised signatories) in the case of corporate/registered trust accounts."
Joint holding → all joint holders sign.
Why the other options are wrong:
- "First holder only" / "first two holders" — the rule says all joint holders.
- "Constituted attorney" — that route is for corporate/registered trust accounts, not individual joint accounts.
What the document does: it "sets out in contractual form the nature of services to be provided, rights and obligations of the DP as well as the client, and the fees/charges payable for the services." Its standard format "is provided by SEBI".
Exception: SEBI-registered FPIs with an agreement with the DP (filed with SEBI) "are not required to submit acknowledgement of Rights and Obligations document."
3.A CDSL DP wants to close a client's account because the client has defaulted on his obligations under the Rights and Obligations document. What does the workbook require?
- a)A 30 days' notice to the client, clearly stating the reasons for closure; the closure process is then the same as for client-initiated closure
- b)No notice — the DP may close the account at once on default
- c)A 7 days' notice, with SEBI's prior approval
- d)A 90 days' notice, after which the depository closes the account
Show the answer
Answer: (a) A 30 days' notice to the client, clearly stating the reasons for closure; the closure process is then the same as for client-initiated closure
Section 4.5.3 states: "The DP may also initiate closure of a client's account if the client has defaulted in performing its obligations laid out in the Rights and Obligations document. The DP should give sufficient notice to the client before initiating closure of his account. In CDSL, a 30 days' notice is required. The notice should clearly state the reasons for closure of account. The process of closing account in such a case is the same as that of client-initiated closure."
CDSL: 30 days' notice, with reasons. (For NSDL the workbook says only "sufficient notice".)
Why the other options are wrong:
- "No notice" — notice is required.
- "7 days, SEBI approval" — neither the period nor SEBI approval appears in the workbook.
- "90 days, depository closes" — the DP closes the account, after 30 days' notice at CDSL.
Don't confuse: a DP terminating its own participation in a depository also gives not less than 30 days' notice (Chapter 3). That is a different rule about a different relationship.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Depository participantThe SEBI-registered agent through whom an investor reaches a depository — NSDL and CDSL cannot open investor accounts themselves, so every demat account is opened and operated through a DP.
- Standing instructionA one-time authority, usually given at account opening, for the DP to credit securities into the account without a fresh instruction each time — the alternative is a Receipt Instruction for every single receipt.
- Bye-LawsThe depository's own rulebook governing its operations, its participants, issuers and beneficial owners, which must conform to the Depositories Act and be approved by SEBI before it takes effect.
- Operating InstructionsThe depository's own detailed operational rulebook, listed in Chapter 2's legal framework beside the Depositories Act and SEBI regulations, and invoked for procedural specifics like defacement and account forms.