Account Maintenance Charges collected upfront on annual/half yearly basis on demat accounts
Summary
The circular mandates that Depository Participants must refund upfront annual or half-yearly account maintenance charges to beneficial owners upon account closure or shifting. The refund amount is calculated based on the balance quarters remaining in the current year, which starts from the date of account opening. This requirement applies to all existing and new accounts with DPs collecting such upfront fees but excludes those collecting quarterly or monthly charges.
Text
It has been noticed that in cases where AMC is collected on an annual upfront basis, on closure/shifting of demat account, the AMC for the balance period for which no service has been provided by the DP, is not refunded to the BO.
In the event of closing of the demat account or shifting of the demat account from one DP to another, the AMC collected upfront on annual/half yearly basis by the DP, shall be refunded by the DP to the BO for the balance of the quarter/s.
For instance, in case annual AMC has been paid by the BO and if the BO closes/shifts his account in the first quarter, he shall be refunded the amount of the balance 3 quarters i.e. 3/4th of the AMC. Likewise, if a BO closes/shifts his account in the third quarter, he shall be refunded the amount for the balance one quarter i.e. 1/4th of the AMC.
For the purpose of the above requirement the year shall begin from the date of opening of the account in quarterly rests.
The above requirements shall be applicable to all existing and new accounts held with DPs which collect annual/half yearly upfront AMC. It is hereby clarified that the above requirements shall not be applicable to those DPs who collect quarterly/ monthly AMC.
make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately, as may be applicable/necessary
bring the provisions of this circular to the notice of their DPs and also to disseminate the same on their website
Communicate the same to all the BOs.
This circular is being issued in exercise of the powers conferred by Section 11 (1) of Securities and Exchange Board of India Act, 1992 and section 19 of the Depositories Act, 1996 to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market.
Source: SecMarx — Account Maintenance Charges collected upfront on annual/half yearly basis on demat accounts. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.