Static database
The frozen snapshot of physical shareholder records — names, folio numbers, certificate numbers, distinctive numbers and PAN — that depositories use to validate every fresh dematerialisation request against.
In plain language
Physical shares stopped being transferable on the exchange from 1 April 2019. But plenty of physical certificates were still sitting with investors, waiting to be dematerialised later. SEBI wanted a way to check, at the moment of dematerialisation, that the name on an old paper certificate genuinely matches the person now asking to dematerialise it.
The fix was to freeze a snapshot of every listed company's physical shareholder register, as it stood on one date, and hand that snapshot to the depositories. The workbook calls this frozen snapshot the static database.
How it works
From Chapter 7, section 7.3.6 (Enhanced Due Diligence for Dematerialization of Physical Securities): listed companies and their RTAs were directed to provide shareholder data — name, folio number, certificate number, distinctive numbers and PAN — as on 31 March 2019 (the "static database"), to the Depositories, latest by 31 December 2019. Depositories were required to capture these details and validate any dematerialisation request received after 31 December 2019 against them.
The depository system retrieves the shareholder name recorded against the folio and certificate number in the static database and checks it against the demat account holder's name. A mismatch raises a flag or alert, and supporting documents are sought — a passport copy, a marriage certificate, a gazette notification of name change, or an Aadhaar card explaining the difference. A complete mismatch sends the applicant to the Issuer or RTA directly, to establish title, rather than to the DP.
A worked example
Mrs Chatterjee holds a physical certificate for 400 shares of Meghna Textiles, issued in the name "Anima Chatterjee," and submits a dematerialisation request in the name "Anima R. Chatterjee" — the name on her current demat account.
The depository system checks the folio and certificate number against the static database frozen as on 31 March 2019, finds the recorded name is "Anima Chatterjee" — a partial mismatch — and raises a flag. Mrs Chatterjee must then submit her PAN card and marriage certificate, explaining the added surname, before the 400 shares can be dematerialised into her account.
Why NISM asks about it
Chapter 7, section 7.3.6, sets out this validation gate. Expect the two dates — 31 March 2019 for the snapshot itself, 31 December 2019 as the deadline to hand it to depositories — and what happens on a name mismatch.
Common exam traps
- Two different 2019 dates: 31 March 2019 is the date the static database is taken as of; 31 December 2019 is the deadline for companies/RTAs to hand it over.
- A partial mismatch triggers a flag and a request for documents; a complete mismatch sends the applicant to the Issuer/RTA directly, not to the DP.
- This check applies to demat requests received after 31 December 2019 — a forward-looking validation gate, not a retrospective audit of demats already completed.
Check yourself
1.Mr. Rajesh Kumar Menon's demat account is in that full name, but his share certificate reads "R. K. Menon". He submits a DRF. What should the DP do?
- a)Reject the DRF, since the name must match letter for letter
- b)Ask him to first get the certificate re-issued in his full name by the company
- c)Treat it as a permitted minor variation (initials in place of names), and consider the securities for demat if the signature on the DRF matches the specimen signature with the DP
- d)Accept it only if he submits a Transposition Form
Show the answer
Answer: (c) Treat it as a permitted minor variation (initials in place of names), and consider the securities for demat if the signature on the DRF matches the specimen signature with the DP
The DP must check that the name of the holder(s) on the DRF and the certificates is exactly the same as in the BO's account, but the workbook adds: "Minor variation however in name, is permitted such as initials in place of first name, middle name, minor spelling mistake in name etc. The permitted variations refer to initials not being spelt out fully or put prior to after the surname. In such cases, if the signature on the DRF matches the specimen signature available with the DP, the securities can be considered for demat."
- A applies the rule without its stated exception.
- B is not required for a permitted variation.
- D confuses the problem. A Transposition Form is for names that match but appear in a different order in a joint holding.
For demat requests received after December 31, 2019, the depository system also checks the name against the issuer's static database and raises a flag if there is a mismatch.
Where this is taught
Free preparation for NISM Series VIRelated terms
- DematerialisationConverting securities held as physical certificates into book-entry holdings: the certificates are defaced, mutilated and surrendered to the issuer, and an equivalent quantity is credited to the holder's demat account.
- Form of TransferRBI's prescribed document to transfer physical government securities, printed on a single sheet of semi-security paper, submitted with the DRF-GS to dematerialise or move book-entry G-Secs.
- Objection memoThe document by which an Issuer or R&T Agent flags a defect in a dematerialisation request, giving the DP 15 days to resolve the objection or supply further information before the request can be rejected.