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NISM Series VI (Depository Operations) study materials
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NISM Series VI (Depository Operations) practice questions

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Question 1Depository Operations (official content domains not enumerated in source)

Under the SEBI (Depositories and Participants) Regulations, which entity is responsible for maintaining the beneficial owner records of securities held in dematerialised form?

  1. The clearing corporation of the relevant exchange
  2. The issuer company's registrar and transfer agent
  3. The depository through its depository participants Correct answer.
  4. The stock exchange where the security is listed

Explanation

The depository maintains beneficial owner records for dematerialised securities, and it does so through its registered depository participants who act as the interface with investors. The registrar maintains the register of members for physical holders, while exchanges and clearing corporations handle trading and settlement, not ownership records.

Question 2Depository Operations (official content domains not enumerated in source)

An investor opens a demat account and later wants a second depository participant to service the same account. What does the depository framework allow?

  1. The investor must close the existing account and open a fresh one with the new DP
  2. The investor can appoint a second DP to service the same account without closing it Correct answer.
  3. The investor must transfer all securities to a new account before changing DPs
  4. The investor can hold two separate demat accounts with the same DP only

Explanation

A beneficial owner may be serviced by more than one depository participant for the same demat account, and the account can be shifted to another DP through a prescribed process without closing it. This is commonly described as changing or adding a DP while retaining the same account and holdings.

Question 3Depository Operations (official content domains not enumerated in source)

Which of the following is the correct description of a 'beneficial owner' in the depository system?

  1. The depository that holds the securities in fungible form
  2. The person in whose name a demat account is opened and who holds the securities beneficially Correct answer.
  3. The depository participant that opens the account
  4. The issuer whose securities are held in dematerialised form

Explanation

A beneficial owner is the person whose name appears on the demat account and who is entitled to the rights attached to the securities, even though legal ownership of the fungible bulk rests with the depository. The DP is only an intermediary, the issuer is the company, and the depository holds securities in trust-like custody.

Question 4Depository Operations (official content domains not enumerated in source)

A shareholder holding physical shares wants to convert them into dematerialised form. Which sequence correctly describes the process?

  1. The investor submits a DRF to the DP, the DP sends it to the issuer/registrar, and on confirmation the securities are credited to the demat account Correct answer.
  2. The investor sends shares directly to the depository, which credits them after verification
  3. The investor's bank converts the shares and informs the depository
  4. The investor surrenders shares to the stock exchange, which arranges the credit

Explanation

Dematerialisation begins with a Dematerialisation Request Form submitted to the DP along with the physical certificates. The DP forwards the request to the issuer or its registrar, and once the registrar confirms and defaces the certificates, the securities are credited to the investor's demat account.

Question 5Depository Operations (official content domains not enumerated in source)

What is the maximum permitted time for a depository participant to process a dematerialisation request after receiving complete documents, as generally prescribed under the regulatory framework?

  1. Within 24 hours of receipt
  2. Within 45 days of receipt
  3. Within 21 days of receipt
  4. Within 7 days of receipt Correct answer.

Explanation

The demat request is required to be processed within seven days of receipt of complete documents by the DP, with the confirmation and credit following the issuer/registrar route. Timelines beyond this are treated as delays requiring reporting and investor redressal.

Question 6Depository Operations (official content domains not enumerated in source)

When an investor wants to convert demat holdings back into physical certificates, which form is used and to whom is it submitted?

  1. DRF, submitted to the issuer
  2. RRF, submitted to the DP Correct answer.
  3. RRF, submitted to the registrar directly
  4. DRF, submitted to the depository

Explanation

Rematerialisation is initiated through a Rematerialisation Request Form submitted to the depository participant, which forwards it through the depository to the issuer. The issuer then issues physical certificates and the corresponding demat balance is debited.

Question 7Depository Operations (official content domains not enumerated in source)

A DP executes a transfer of securities from a client's demat account to another account on the client's instruction. What is the standard delivery instruction mechanism used?

  1. A cheque signed by the client
  2. A delivery instruction slip signed by the client and accepted by the DP Correct answer.
  3. A letter to the depository signed by the client
  4. An oral instruction confirmed by telephone

Explanation

Transfers out of a demat account are executed on the basis of a delivery instruction slip, which must be signed by the account holder(s) as per the recorded specimen signature. The DP verifies and processes the instruction through the depository system.

Question 8Depository Operations (official content domains not enumerated in source)

Which of the following best describes 'off-market' transfer in the depository system?

  1. A transfer executed on the instruction of the client without any corresponding market trade Correct answer.
  2. A transfer that requires prior approval of the stock exchange
  3. A transfer only permitted between family members
  4. A transfer that settles through a clearing corporation against a trade

Explanation

An off-market transfer is a transfer of securities between demat accounts that is not linked to a trade settled through a clearing corporation. It is executed on a delivery instruction slip and attracts stamp duty as applicable, unlike market transfers settled through the exchange mechanism.

Question 9Depository Operations (official content domains not enumerated in source)

An investor has pledged securities in favour of a lender. Which statement correctly reflects the position of the securities during the pledge?

  1. The securities remain in the borrower's account but are blocked in favour of the pledgee Correct answer.
  2. The securities are converted into physical form and held by the lender
  3. The securities are transferred to the depository's own account
  4. The securities are transferred to the lender's account and the lender becomes the beneficial owner

Explanation

In a pledge, the securities remain in the beneficial owner's demat account but are marked as blocked in favour of the pledgee, who can invoke the pledge on default. Ownership does not pass to the lender merely by creation of the pledge.

Question 10Depository Operations (official content domains not enumerated in source)

What is the effect of a 'freeze' instruction given by an account holder to the DP?

  1. All securities are automatically converted to physical form
  2. Debits from the account are blocked until the freeze is removed Correct answer.
  3. The account is transferred to a new depository participant
  4. The account is closed and all securities are transferred to the depository

Explanation

A freeze instruction prevents debits from the demat account, protecting the holder's securities from unauthorised transfer, while credits and certain corporate benefits may continue. The freeze remains until the account holder instructs its removal in the prescribed manner.

Question 11Depository Operations (official content domains not enumerated in source)

An investor dies and the nominee approaches the DP for transmission of securities. Which of the following is generally required to give effect to transmission in favour of the nominee?

  1. A fresh trading account in the nominee's name
  2. A transmission request with the death certificate and prescribed documents Correct answer.
  3. Approval of the stock exchange where the securities are listed
  4. Consent of all other legal heirs in every case

Explanation

Transmission in favour of a nominee is processed on a request supported by the death certificate of the deceased holder and other prescribed documents such as the nominee's identification and the relevant forms. The DP verifies these and registers the transmission in the depository system.

Question 12Depository Operations (official content domains not enumerated in source)

Which of the following statements about nomination in a demat account is accurate?

  1. A single account may have more than one nominee at the option of the holder Correct answer.
  2. Nomination automatically transfers ownership to the nominee during the holder's lifetime
  3. Nomination is compulsory for all demat accounts
  4. Nomination can be made only in favour of a family member as defined by the DP

Explanation

Nomination is optional, and the account holder may choose to register one or more nominees with the prescribed details. Nomination operates only on the death of the holder and does not create any interest during the holder's lifetime.

Question 13Depository Operations (official content domains not enumerated in source)

A corporate action results in bonus shares for securities held in demat form. How are the bonus shares credited?

  1. The DP purchases bonus shares on the exchange on the investor's behalf
  2. The investor must submit a fresh DRF for the bonus shares
  3. The bonus shares are issued in physical form and must be dematerialised separately
  4. The issuer credits the bonus shares directly to the beneficial owners' demat accounts based on the depository's records Correct answer.

Explanation

For dematerialised holdings, the issuer, using the beneficiary position furnished by the depository, credits bonus shares directly into the eligible beneficial owners' demat accounts. No fresh demat request is needed because the securities are already held electronically.

Question 14Depository Operations (official content domains not enumerated in source)

Which of the following is the primary function of a depository in the Indian securities market?

  1. To hold securities in electronic form and enable their transfer without movement of certificates Correct answer.
  2. To underwrite public issues of securities
  3. To provide portfolio management services to investors
  4. To lend money against securities pledged by investors

Explanation

A depository holds securities in dematerialised, fungible form and enables transfer of ownership through book entries rather than physical movement of certificates. Its role is custodial and record-keeping, not lending, underwriting, or portfolio management.

Question 15Depository Operations (official content domains not enumerated in source)

An investor notices an unauthorised debit in the demat account. Which mechanism is available for resolution under the depository framework?

  1. Requesting the issuer to reissue the securities in physical form
  2. Using the SEBI SCORES platform or the depository's grievance redressal mechanism, with escalation to SEBI if unresolved Correct answer.
  3. Filing a criminal complaint directly with the depository's board
  4. Approaching the clearing corporation for reversal of the debit

Explanation

Investor grievances against a DP are first raised with the DP and, if unresolved, through the depository's grievance redressal mechanism and the SEBI SCORES platform. SEBI can escalate and direct action where the grievance is not redressed.

Question 16Depository Operations (official content domains not enumerated in source)

Which of the following documents is essential for opening a demat account and is used to verify the identity and address of the applicant?

  1. A copy of the investor's share trading history
  2. A copy of the latest income tax return only
  3. A letter of recommendation from the investor's bank
  4. KYC documents such as proof of identity and proof of address as prescribed Correct answer.

Explanation

Opening a demat account requires compliance with the prescribed KYC norms, including proof of identity and proof of address, along with the account opening form and photograph. These documents establish the identity of the beneficial owner and are mandatory for all applicants.

Question 17Depository Operations (official content domains not enumerated in source)

A DP receives a delivery instruction slip that is unsigned but accompanied by a covering letter from the client. How should the DP proceed?

  1. Execute the instruction and obtain the signature later
  2. Execute the instruction because the covering letter confirms the client's intent
  3. Forward the slip to the depository for a decision
  4. Reject the instruction because the slip must bear the client's signature as per the recorded specimen Correct answer.

Explanation

A delivery instruction slip must be signed by the account holder in accordance with the specimen signature recorded with the DP. An unsigned slip, even with a covering letter, does not meet this requirement and must be rejected to prevent unauthorised debits.

Question 18Depository Operations (official content domains not enumerated in source)

Which of the following statements about the 'ISIN' is correct?

  1. ISIN is the registration number of the depository participant
  2. ISIN is a code assigned to each demat account holder
  3. ISIN is the code used for settling trades on the stock exchange
  4. ISIN is a unique code assigned to each security to identify it in the depository system Correct answer.

Explanation

The International Securities Identification Number is a unique identifier allotted to each security that is admitted for dematerialisation. It allows the depository system to identify the specific security being credited, debited, or pledged.

Question 19Depository Operations (official content domains not enumerated in source)

An investor holds securities in a demat account jointly with another person. What is the general position on operation of the account?

  1. The joint holders must operate the account as per the mode specified at the time of opening Correct answer.
  2. The account can be operated only with the DP's written consent
  3. Only the first holder can give instructions
  4. Either holder can operate the account irrespective of the recorded mode

Explanation

Joint demat accounts are operated in accordance with the mode of operation recorded at the time of account opening, such as jointly or either or survivor. The DP is bound to act only in line with that recorded instruction.

Question 20Depository Operations (official content domains not enumerated in source)

Which of the following best describes the role of a 'depository participant' in the depository system?

  1. An agent of the issuer who maintains the register of members
  2. A registrar that processes corporate actions for listed companies
  3. A clearing member of the stock exchange
  4. An intermediary registered with the depository that provides depository services to investors Correct answer.

Explanation

A depository participant is an intermediary registered with the depository that acts as the interface between the depository and investors, offering account opening, dematerialisation, transfer, and related services. It is not an agent of the issuer, a clearing member, or a registrar.

Question 21Depository Operations (official content domains not enumerated in source)

A client gives a 'one-time' delivery instruction to the DP to transfer securities to a specified account whenever a certain event occurs. What is the correct treatment of such an instruction?

  1. It is valid indefinitely until revoked by the client
  2. It must be countersigned by the depository before execution
  3. It must be executed only once and cannot be used for recurring transfers Correct answer.
  4. It is invalid because delivery instructions cannot specify a future event

Explanation

A one-time delivery instruction authorises a single transfer and is exhausted once executed. Recurring or standing instructions require a separate standing instruction facility with the prescribed conditions, so a one-time slip cannot be reused.

Question 22Depository Operations (official content domains not enumerated in source)

Which of the following is a valid reason for a DP to reject a dematerialisation request?

  1. The investor is a resident individual
  2. The certificates are mutilated or the signature does not match the recorded specimen Correct answer.
  3. The investor holds the securities for more than one year
  4. The investor's name differs slightly in spelling from the certificate

Explanation

A demat request may be rejected where the certificates are mutilated, the signature does not match the recorded specimen, or the documents are otherwise deficient. These conditions create doubt about the validity of the request and are grounds for rejection.

Question 23Depository Operations (official content domains not enumerated in source)

What is the significance of the 'beneficiary position' report provided by the depository to the issuer?

  1. It shows the names and holdings of beneficial owners for the purpose of corporate actions and record-keeping Correct answer.
  2. It records the DP's commission earned during the month
  3. It lists the trades executed on the exchange during the day
  4. It contains the list of defaulting clients of the DP

Explanation

The beneficiary position report gives the issuer the details of beneficial owners and their holdings so that corporate benefits and communications reach the correct persons. It does not relate to trade execution, DP commissions, or client defaults.

Question 24Depository Operations (official content domains not enumerated in source)

An investor wants to transfer securities to another person as a gift. Which statement is correct regarding the stamp duty treatment of such an off-market transfer?

  1. Stamp duty is paid by the depository on the investor's behalf
  2. No stamp duty is payable because it is a gift
  3. Stamp duty is payable as prescribed for off-market transfers, and the DP collects it as required Correct answer.
  4. Stamp duty is payable only if the transfer exceeds a specified value

Explanation

Off-market transfers, including gifts, attract stamp duty at the prescribed rate, which is collected through the depository participant and remitted as required. The gift nature of the transaction does not by itself exempt it from the duty.

Question 25Depository Operations (official content domains not enumerated in source)

Which of the following statements about the records a DP must maintain is correct?

  1. Records need to be kept only in electronic form
  2. Records may be destroyed once the client closes the account
  3. Records must be kept only for the current financial year
  4. Records must be maintained for the period prescribed by the regulator and made available for inspection Correct answer.

Explanation

A DP is required to maintain records of accounts, instructions, and transactions for the prescribed period and to make them available for inspection by the depository and the regulator. Retention is not limited to the current year and is not ended merely by account closure.

Question 26Depository Operations (official content domains not enumerated in source)

Under the SEBI (Depositories and Participants) Regulations, within what period must a depository participant register a client's demat account opening form after receiving a complete application?

  1. Within 45 days of receipt
  2. Within 30 days of receipt
  3. Within 7 days of receipt
  4. Within 15 days of receipt Correct answer.

Explanation

The regulations require the DP to enter the client's details into the depository system and open the account within 15 days of receiving a complete application. If the DP fails to do so, the client may approach another DP or the depository.

Question 27Depository Operations (official content domains not enumerated in source)

A client's demat account is held jointly by two persons with the option 'either or survivor' selected. How is a debit instruction to be executed by the DP?

  1. Only when the first-named holder signs the delivery instruction slip
  2. When any one of the joint holders signs the delivery instruction slip Correct answer.
  3. Only when both joint holders sign the delivery instruction slip
  4. Only after a court order authorising the operation

Explanation

The mode of operation is fixed at the time of account opening in the joint holder details recorded with the depository. Where 'either or survivor' is chosen, any one holder can operate the account, so a slip signed by one holder must be accepted. The DP cannot impose a stricter rule than the recorded choice.

Question 28Depository Operations (official content domains not enumerated in source)

Which statement correctly identifies the entity that maintains the securities account balances at the depository level and settles trades through the depository interface?

  1. The clearing corporation Correct answer.
  2. The depository participant
  3. The issuer's registrar and transfer agent
  4. The stock exchange

Explanation

In the Indian depository system, clearing corporations maintain the pool accounts and instruct the depository to debit and credit participant accounts for settlement. The clearing corporation is the counterparty that interfaces with the depository for trade settlement.

Question 29Depository Operations (official content domains not enumerated in source)

A DP receives a client instruction to dematerialise certificates where the name on the certificate differs from the name on the demat account due to a spelling variation. What is the appropriate course of action?

  1. Process the request since the difference is only in spelling
  2. Reject the request and ask the client to obtain a name correction from the issuer Correct answer.
  3. Process the request after obtaining the client's written indemnity
  4. Forward the certificates to the depository for rectification

Explanation

Dematerialisation requires that the name on the certificate match the demat account name. Where there is a mismatch, even of spelling, the DP cannot accept the request; the client must get the name corrected by the issuer's registrar first. Only certificates in the same name can be credited to the account.

Question 30Depository Operations (official content domains not enumerated in source)

Which of the following is the correct description of a 'lock-in' on securities held in a demat account?

  1. A limit on the number of transactions in a day
  2. A restriction on the transfer of securities for a specified period Correct answer.
  3. A temporary freeze placed by the depository on the account
  4. A restriction on the value of securities that may be pledged

Explanation

A lock-in is a restriction imposed by the issuer or regulator that prevents the holder from transferring the securities for a specified period. During the lock-in, the securities remain in the account but cannot be sold or transferred.

Question 31Depository Operations (official content domains not enumerated in source)

A client wants to transfer securities from his demat account to his own account with another DP, both accounts in identical names. Which facility should be used?

  1. An off-market transfer through a delivery instruction slip Correct answer.
  2. An inter-depository transfer through the issuer
  3. A market transfer through a clearing corporation
  4. A rematerialisation request followed by fresh dematerialisation

Explanation

A transfer between two demat accounts where no consideration is paid is an off-market transfer, executed by a delivery instruction slip. Moving one's own holdings to another DP falls in this category because no stock exchange trade is involved.

Question 32Depository Operations (official content domains not enumerated in source)

Which of the following statements about the 'CAS' (Consolidated Account Statement) issued in the depository system is correct?

  1. It is issued only by the DP to its own clients
  2. It consolidates holdings across all demat accounts and mutual fund folios of the investor Correct answer.
  3. It is issued only when the investor requests it in writing
  4. It replaces the periodic transaction statement for all purposes

Explanation

The CAS is a consolidated statement that provides a single view of an investor's holdings across demat accounts with different DPs and mutual fund folios. It is generated by the depository and sent to the investor.

Question 33Depository Operations (official content domains not enumerated in source)

A client has been allotted shares in an IPO and the shares are in the process of being credited to the demat account. During this period, how does the DP record the position?

  1. As a credit under a separate 'allotment pending' category Correct answer.
  2. As a pledge in favour of the issuer
  3. As a credit in the client's account only after the shares are listed
  4. As a debit balance in the client's account

Explanation

Until the shares are actually credited, the DP records the allotment under a separate category so that the client's position is visible without treating the shares as freely transferable. Once the credit is received from the issuer's registrar, the shares move into the normal balance.

Question 34Depository Operations (official content domains not enumerated in source)

Which statement correctly describes the 'pledge' facility in the depository system?

  1. The pledged securities are transferred to the pledgee's account immediately
  2. The securities remain in the pledgor's account with a marked pledge in favour of the pledgee Correct answer.
  3. The securities are converted to physical form and held by the pledgee
  4. The securities are frozen permanently until the loan is repaid

Explanation

A pledge does not transfer ownership; the securities stay in the pledgor's account with a pledge flag in favour of the pledgee. The pledgee can invoke the pledge only on default, and until then the securities remain in the pledgor's account.

Question 35Depository Operations (official content domains not enumerated in source)

A DP receives a request from a client to change the bank account linked to the demat account. What is the standard procedure?

  1. The DP accepts the change over the phone and confirms by email
  2. The DP obtains a written request with the new bank details and verifies the client's signature Correct answer.
  3. The DP forwards the request to the depository for approval
  4. The DP changes the bank details only at the time of account opening

Explanation

Changes to bank details are sensitive and must be made on a written request signed by the client, with verification of the signature against the DP's records. This protects the client against unauthorised changes to the payout account.

Question 36Depository Operations (official content domains not enumerated in source)

Which of the following best describes the 'transmission' of securities in a demat account?

  1. The movement of securities between the client's own accounts
  2. The conversion of physical certificates into electronic form
  3. The transfer of securities from one DP to another on client instruction
  4. The transfer of securities to the legal heirs or nominee on the death of the holder Correct answer.

Explanation

Transmission is the process by which securities held by a deceased holder are transferred to the nominee or legal heirs. It is distinct from a normal transfer because it is triggered by death rather than by a trading or gift transaction.

Question 37Depository Operations (official content domains not enumerated in source)

A client instructs his DP to transfer securities to a third party as a gift. Which statement about the stamp duty on such a transfer is correct?

  1. No stamp duty is payable because the transfer is in demat form
  2. Stamp duty is payable only when the securities are rematerialised
  3. Stamp duty is collected by the depository and paid to the exchange
  4. Stamp duty is payable as per the applicable state law on the transfer instrument Correct answer.

Explanation

A gift transfer is an off-market transfer and attracts stamp duty under the applicable state stamp law, which the DP collects and remits. The demat form does not exempt the transaction from stamp duty.

Question 38Depository Operations (official content domains not enumerated in source)

Which of the following statements about the 'settlement calendar' for T+1 settlement in the Indian equity market is correct?

  1. The settlement is completed on the same day as the trade
  2. The settlement is completed on the next working day after the trade Correct answer.
  3. The settlement is completed two working days after the trade
  4. The settlement is completed within five working days after the trade

Explanation

Under T+1 settlement, the securities and funds are settled on the first working day after the trade date. This shortens the settlement cycle and reduces counterparty risk in the depository system.

Question 39Depository Operations (official content domains not enumerated in source)

A client submits a delivery instruction slip after the cut-off time prescribed by the DP for same-day processing. How should the DP treat the instruction?

  1. Process it on the next working day as per the DP's disclosed policy Correct answer.
  2. Reject the slip and return it to the client
  3. Process it immediately regardless of the cut-off
  4. Treat the slip as invalid and ask the client to submit a fresh one

Explanation

DPs disclose a cut-off time for accepting delivery instructions for same-day execution. A slip received after the cut-off is normally processed on the next working day, and the DP's policy on this must be transparent to clients.

Question 40Depository Operations (official content domains not enumerated in source)

Which of the following is a correct statement about the 'know your customer' (KYC) records that a DP must maintain for a demat account?

  1. KYC records must be retained for five years after the account is closed
  2. KYC records must be retained for the period prescribed by the regulator after the account is closed Correct answer.
  3. KYC records may be destroyed once the account becomes dormant
  4. KYC records need be maintained only until the first transaction is completed

Explanation

A DP must retain KYC and account records for the period prescribed by the regulator after the account is closed, which is currently five years under the PMLA framework. Retention ensures records are available for investigation and audit.

Question 41Depository Operations (official content domains not enumerated in source)

A client's demat account has been frozen by the DP on the instructions of a regulatory authority. Which statement is correct?

  1. The client cannot debit or credit securities until the freeze is lifted Correct answer.
  2. The client can pledge securities but cannot sell them
  3. The client can transfer securities to a nominee only
  4. The client can continue to sell securities but cannot purchase

Explanation

A freeze imposed on regulatory instructions blocks all debits and credits to the account until it is lifted by the authority that ordered it. The DP cannot permit any transaction that would defeat the purpose of the freeze.

Question 42Depository Operations (official content domains not enumerated in source)

Which of the following describes the 'depository participant' identity number (DP ID) used in the Indian depository system?

  1. A sixteen-digit number that combines the DP ID and the client ID
  2. An eight-character identifier assigned to each DP by the depository Correct answer.
  3. A twelve-digit number assigned by SEBI to each investor
  4. A number assigned by the stock exchange to each broker

Explanation

The DP ID is an eight-character code assigned by the depository to identify each participant. The client's unique identification in the depository system is formed by combining the DP ID with the client ID.

Question 43Depository Operations (official content domains not enumerated in source)

An investor wants to dematerialise shares held in a company that has been delisted. Which statement is correct?

  1. Delisted securities cannot be dematerialised
  2. Delisted securities must be sold in physical form only
  3. Delisted securities can be dematerialised if the issuer has established connectivity with the depository Correct answer.
  4. Delisted securities can be dematerialised only through the stock exchange

Explanation

Dematerialisation depends on the issuer establishing connectivity with the depository and admitting its securities. A delisted company can still have its securities dematerialised if the connectivity exists and the securities are admitted.

Question 44Depository Operations (official content domains not enumerated in source)

Which of the following is the correct treatment of a 'beneficial owner' in the depository system?

  1. The beneficial owner is the clearing corporation that settles the trade
  2. The beneficial owner is the person whose name is recorded as the holder of the securities in the depository's records Correct answer.
  3. The beneficial owner is the issuer of the securities
  4. The beneficial owner is the depository that holds the securities

Explanation

The beneficial owner is the person entitled to the securities, whose name is recorded in the depository's records through the DP. The depository holds the securities in a fungible pool and the beneficial owner has the enforceable right to them.

Question 45Depository Operations (official content domains not enumerated in source)

A client has pledged securities in favour of a bank and subsequently wants to sell those securities. What is the position?

  1. The client can sell the securities because the pledge does not affect title
  2. The client can sell only after the pledge is released by the pledgee Correct answer.
  3. The client can sell the securities if the buyer agrees to the pledge
  4. The client can sell the securities after informing the depository

Explanation

Pledged securities are blocked for debit in the pledgor's account, so they cannot be sold until the pledge is released by the pledgee. The pledge creates an encumbrance that the DP must respect.

Question 46Depository Operations (official content domains not enumerated in source)

Which of the following statements about the 'rematerialisation' process is correct?

  1. The investor submits a request to the DP, who forwards it to the issuer's registrar for printing of certificates Correct answer.
  2. The investor must obtain the depository's prior approval before applying
  3. The investor submits the request directly to the stock exchange
  4. The investor must first sell the securities and then buy them in physical form

Explanation

In rematerialisation, the investor requests the DP to convert demat holdings into physical certificates. The DP forwards the request through the depository to the issuer's registrar, which prints and dispatches the certificates.

Question 47Depository Operations (official content domains not enumerated in source)

A DP discovers that a delivery instruction slip bears a signature that does not match its records. What is the appropriate action?

  1. Forward the slip to the depository for a decision
  2. Execute the instruction and seek confirmation later
  3. Reject the instruction and inform the client in writing Correct answer.
  4. Execute the instruction after obtaining a verbal confirmation

Explanation

The DP must verify the client's signature before acting on a delivery instruction. A mismatch is a red flag for possible fraud, so the DP should reject the instruction and inform the client in writing.

Question 48Depository Operations (official content domains not enumerated in source)

Which of the following correctly describes the 'e-DIS' (electronic delivery instruction slip) facility?

  1. A facility that allows the DP to debit a client's account without instruction
  2. A facility used only for rematerialisation requests
  3. A facility that allows clients to submit delivery instructions electronically after authentication Correct answer.
  4. A facility that replaces the need for KYC verification

Explanation

e-DIS lets clients issue delivery instructions electronically after authentication, replacing the paper slip. The instruction is still the client's and the DP must act only on a properly authenticated instruction.

Question 49Depository Operations (official content domains not enumerated in source)

A company announces a rights issue and a client holding shares in demat form wants to apply. How is the entitlement generally handled in the depository system?

  1. The entitlement is transferred to the issuer's own account
  2. The entitlement is automatically converted into bonus shares
  3. The entitlement is paid in cash to the client's bank account
  4. The entitlement is credited to the client's demat account as a separate temporary ISIN Correct answer.

Explanation

Rights entitlements are credited to the client's demat account under a separate temporary ISIN so that the client can renounce or apply for the rights. On allotment, the rights shares are credited under the permanent ISIN of the company.

Question 50Depository Operations (official content domains not enumerated in source)

Which of the following statements about the fees charged by a DP to its clients is correct?

  1. The DP's fees are fixed by the depository and cannot vary
  2. The DP may charge any fee without disclosure
  3. The DP must disclose its fee structure to clients in advance Correct answer.
  4. The DP may charge different fees to clients without any disclosure

Explanation

A DP must disclose its fee structure to clients in advance so that clients can make an informed choice. Fees may vary between DPs, but transparency is mandatory.