NISM Series VI: Depository Operations Certification 'Final Test'

Explanation:

Locked-in securities cannot be invoked before the lock-in release date.

Explanation:

The facility for unilateral closure (Unpledge) of Pledge by the Pledgee is also provided by the depositories. In this case, the pledgee submits an instruction in the prescribed form to its Depository Participant (DP) to initiate unilateral closure of pledge/hypothecation.

Explanation:

SEBI encourages investors to lodge complaints through electronic mode in SEBI Complaints Redress System (SCORES). However, complaints received from investors in physical form are also digitized by SEBI and uploaded in SCORES.

Explanation:

Acceptance of the creation of pledge/ hypothecation appears in DP system of the pledgor’s DP and pledgee’s DP as a status change to Pledged.

Explanation:

FII clients registered with SEBI and who have entered into an agreement with the DP are not required to submit acknowledgement of Rights and Obligations document. The FII-DP agreement authorizes the DP to act on behalf of the FII for availing depository services.

Explanation:

The process of a CC (Clearing Corporation) transferring the securities to the broker’s CM-account (Clearing Member Account or Settlement Account) for the quantity of securities purchased by them on behalf of their clients is known as ‘pay-out’.

The process of a broker/trading member submitting securities sold by him on behalf of his client, to CC of a stock exchange is called ‘pay-in’.

Explanation:

The investors who wish to participate in the tender offers viz., buyback, takeover and delisting offer of company will be required to mention the details as per the existing process (as given below) while submitting delivery instructions slip (DIS) or electronic instructions to the Participants.

– Execution Date – Tender Offer Type (i.e. Market Type) – Event Number (i.e., Settlement Number) – CM BP ID – ISIN – Quantity

Explanation:

An investor in government securities has the option to have securities issued either in physical form or in book entry form (commonly known as SGL form).

The depositories in India have been given permission to maintain SGL accounts, of investors through its DPs. Any client account opened with a DP may be used for dealing in government securities. Thus, equity shares, mutual fund units and G-Secs can be dealt with through a single account.

Explanation:

The Issuer / its R&T Agent, on the basis of details of holdings received from the depository, dispatch the application form for rights issue to the beneficial owners. The form requires the applicant to state his option about whether he would like to receive the new securities in physical form or dematerialised from.

In case, the applicant does not exercise his option, new securities are allotted in the form in which the shareholder held the security as on the record date.

Explanation:

An entity desirous of becoming a DP of a depository should make an application to SEBI through the Depository. The application complete in all respects should be submitted to the depository in which membership is sought for.

The depository evaluates the application and if it finds that the applicant has the potential to be admitted as a DP, then it forwards that application to SEBI within 30 days from the date of receipt of the application. Along with the application, the depository also submits its recommendations regarding the applicant.

Explanation:

A Depository company must have a minimum net worth of Rs. 100 crore. The sponsor(s) of the depository have to hold at least 51 percent of the equity capital of the depository company. Participants of that depository, if any, can hold the balance of the equity capital.

However, no single depository participant can hold, at any point of time, more than 15 percent of the equity capital of that depository.

Explanation:

The powers in respect of the contracts for sale and purchase of securities, gold related securities, money market securities and securities derived from these securities and ready forward contracts in debt securities are exercised concurrently by RBI.

Explanation:

The ‘Delivery Instruction’ for an off-market trade or for a market trade has to be clearly indicated in the form by marking appropriately. The form should be complete in all respects.

All the holder(s) of the account have to sign the form. If the debit has to be effected on a particular date in future, account holder may mention such date in the space provided for ‘execution date’ in the form.

Explanation:

The Depositories Act, 1996 provides for the establishment of depositories in securities market with the objective of ensuring free transferability of securities with speed, accuracy and security by (a) making securities freely transferable subject to certain exceptions; (b) dematerialisation of the securities in the depository mode; and (c) providing for maintenance of ownership records in a book entry form.

Explanation:

Transaction statements:

a. Transaction statements shall be sent to the BO at the end of each quarter. If there are no transactions in any quarter, no transaction statement may be sent for that quarter.

b. If there are no transactions and no security balance in an account, then no further transaction statement needs to be provided.

Explanation:

Certificate of Deposit (CD) – The minimum size to be subscribed/ transacted by investor through the depository system is Rs. 1 lakh.

Explanation:

At least two Delivery Instruction Slips (DIS) are issued at the time of Basic Services Demat Account opening.

Explanation:

The depositories have no restriction on existing accounts being used for demat of debt instruments. It depends upon the convenience of investors whether they want to open a separate account for debt instruments.

Also a DP does not provide a separate Transaction Statement for debt instruments. A single transaction statement reflects all the holdings and transactions in a particular account, irrespective of the type of instrument.

Explanation:

In the event of the death of a joint holder, the balance lying in the account can be transmitted, on request of the surviving holders, to a new account to be opened by the surviving holders.

The earlier account having the deceased holder’s name is closed after such transmission.

Explanation:

In case of death of one or more of the joint holders, the surviving joint holder(s) can get the name(s) of the deceased removed from the security certificate(s) and get them dematerialised by submitting the security certificates along with the Transmission Form and the DRF to the Participant along with the original or copy of the death certificate of the deceased holder(s), duly notarised or attested by a Gazetted Officer or by a notary public.

The DP should ensure that the demat account is in the name of the surviving holders only.

Explanation:

Dematerialisation is the process of holding the securities in a fungible form. They do not bear any distinguishable features like distinctive number, folio number or certificate number. Once the shares are dematerialised, they lose their identification features in terms of share certificate number, distinctive numbers and folio numbers.

Fungible means “movable things that are standardised, so that one unit is essentially the same as another which may be estimated and replaced by weight, number and measure”.

Explanation:

A clearing corporation of stock exchange can be admitted as a user on the depository, only if it fulfills the conditions laid down. One of the criteria is – The clearing corporation or a clearing house of a stock exchange has adequate hardware and software systems to interact with the depository as specified in the Business Rules.

Explanation:

For Pay in – Pay out of securites, the Clearing Members will be required to give Inter-settlement Instructions to the Participants for securities lying within a same CM account but in different settlement pocket.

Explanation:

The Depositories Act enables the setting up of multiple depositories in the country. This was to ensure that there is competition in the depository services and more than one depository is in operation.

The Depositories Act facilitated the establishment of the two depositories in India viz., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

Explanation:

If the seller client or Clearing Member is unable to deliver the securities within a pay-in deadline time, the short deliveries are auctioned and are purchased by the Clearing Corporation in an open auction. This difference in price is borne by the defaulter Clearing Member.

Explanation:

The Facility for unilateral closure (Unpledge) of Pledge by the Pledgee has also been provided by the depositories. In this case, the pledgee submits an instruction in the prescribed form to its DP to initiate unilateral closure of pledge / hypothecation.

Explanation:

DRF ie. Dematerialisation Request Form

Explanation:

True. In the case of NSDL (National Securities Depository Limited), if a client wishes to change the address in their demat account, they are required to personally visit the office of the Depository Participant (DP) where they maintain and operate the account. The client must submit an application for the change of address through this in-person visit to the DP’s office.

Explanation:

To establish a Depository, the depository company is required to have a minimum net worth of Rs. 100 crores. This financial requirement ensures that the depository is adequately capitalized to perform its functions and maintain financial stability in its operations.

Explanation:

The depository it self acts as a R&T Agent and discharges RTA functions for G-Secs.

Explanation:

In CDSL (Central Depository Services Limited), there are indeed options for early pay-in, normal pay-in, and auto pay-in. These options provide flexibility and convenience for participants in managing their pay-in processes, allowing for timely and efficient settlement of transactions. Each option caters to different scenarios and requirements within the depository system.

Explanation:

An investor has the option of opening an account with several DPs or opening several accounts with a single DP.

Explanation:

The clearing system attached to STOCK EXCHANGE performs the function of ascertaining the payin or payout.

Explanation:

True. U.N. entities and multilateral agencies exempt from paying taxes or filing tax returns in India are indeed excused from the mandatory requirement of PAN (Permanent Account Number) for opening a demat account. This exemption recognizes their special status and the associated tax privileges.

Explanation:

The Facility for unilateral closure (Unpledge) of Pledge by the Pledgee has also been provided by the depositories. In this case, the pledgee submits an instruction in the prescribed form to its DP to initiate unilateral closure of pledge / hypothecation.

Explanation:

The form for Opening a HUF account is the same as that of corporate account.

Explanation:

Depository Participants (DPs) are intermediaries between the depository and the investors. They facilitate the interaction between investors and the depository by offering demat and other related services. DPs play a crucial role in the functioning of the depository system, managing accounts, and ensuring smooth transactions for investors in the securities market.

Explanation:

True. The relationship between Depository Participants (DPs) and depositories is indeed governed by an agreement under the Depositories Act. This agreement outlines the terms, conditions, and obligations that both parties must adhere to. It ensures a standardized and regulated framework for the functioning of DPs within the depository system, promoting transparency, efficiency, and investor protection.

Explanation:

A DP may register the transfer of securities to or from a beneficial owner’s account only on receipt of instructions from the beneficial owner. No debit or credit can be given to the account of a beneficial owner without a due authorisation from such beneficial owner.

However, for ease of operation and elimination of redundancies, a clause has been included in the standard format of Rights and Obligations document. This clause 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 without any further instruction from them. These instructions are given as a part of the account opening form itself.

Explanation:

All the mentioned precautions are crucial for safeguarding records in a depository system. Taking daily backups, storing copies at a remote site, and ensuring protection against fire, theft, and manipulation are comprehensive measures to prevent loss, destruction, or tampering of records. This multi-faceted approach enhances the security and integrity of the records maintained by a Depository Participant.

Explanation:

The investor is able to save a lot on account of stamp duty as government has exempted stamp duty on transfer of securities in dematerialised form.

Explanation:

Rights and Obligations of Issuers and their R&T Agents –

The issuer and its R&T Agents have to reconcile with the records of the depository, the records in respect of balances of eligible securities with clients and confirm to all the Depositories, the total security balances both in physical as well as in electronic holdings in the books.

In case where a State or the Central Government is the issuer, the depository reconciles the records of the dematerialised securities with the statement provided by the RBI on a daily basis.

Explanation:

The following are important descriptions of a transaction done on a stock exchange. All these descriptions have to be written on the ‘DIS’ – Delivery instructions slips

1. Market Type – Stock exchanges offer different market segments in which trades can be done. The segmentation is done by the type of settlement or type of trade

2. Settlement Number – Trading periods of each of the market segments is identified by a settlement number. Every settlement number has a trade beginning day, trade-ending day, settlement pay-in day and settlement pay-out day etc.

3. Clearing Member Every broker in a stock exchange participating in settlement process through depository is required to open clearing member account

Explanation:

Major players in the primary market include the merchant bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors.

Explanation:

True. When a minor becomes a major, it is necessary to execute a fresh DP-Client agreement with the Client. This is because the legal capacity and responsibilities change when a minor reaches adulthood. A new agreement ensures that the terms and conditions of the relationship are aligned with the individual’s status as a major. It also helps update personal and contractual details as needed for compliance and legal purposes.

Explanation:

True. It is generally mandatory for all categories of demat account holders to provide PAN Card details. However, there might be specific exceptions to this rule. PAN (Permanent Account Number) is a key identification document for financial transactions in India, and its requirement is often enforced to ensure compliance with tax regulations.

Explanation:

The correct answer is SEBI (Securities and Exchange Board of India). A depository needs to obtain a certificate of registration from SEBI, the regulatory authority for the securities market in India. SEBI regulates depositories to ensure compliance with established standards and to maintain the integrity and efficiency of the securities market.

Explanation:

The correct answer is “Clearing Member Account.” This account is opened by a broker or a clearing member specifically for settling trades executed on a recognized stock exchange. It is used for the efficient and organized settlement of transactions in the stock market.

Explanation:

TAn investor can subscribe to minimum of Rs. 5,00,000 or multiples thereof, as the face value of a
Commercial Paper in the depository system is taken as Rs. 5,00,000.

Explanation:

When a client’s account is closed, it’s crucial for the DP (Depository Participant) to use the term “ACCOUNT CLOSED” prominently on the Statement of Transaction (SOT) to provide clear and unambiguous information to the client. This explicit notation helps the client easily recognize the status of their account and understand that it has been officially closed. It contributes to transparency in communication and ensures that the client is aware of the closure of their account when reviewing the statement.

Explanation:

A POA holder cannot nominate.

Explanation:

The DP should maintain and preserve the records and documents for a minimum period of 8 years as per provisions given in the SEBI (Depositories and Participants) Regulation, 2018 and PMLA and the Rules made thereunder.

Explanation:

Under the Depositories Act, 1996, a Depository Participant (DP) is described as an agent of the depository. A DP is an entity who is registered as such with SEBI under the provisions of the SEBI (Depositories & Participants) Regulations, 2018.

As per the provisions of these regulations, an entity can offer depository-related services only after obtaining a certificate of registration from SEBI as a depository participant. These regulations also define the eligibility criteria for registration with SEBI as a depository participant.

Explanation:

When a company issues bonus shares, shareholders typically have the option to receive these shares in either physical (paper) form or in dematerialized (electronic) form. Shareholders holding securities in physical form can choose to convert them into dematerialized form, and vice versa.

Dematerialization refers to the process of converting physical share certificates into electronic form, and it is facilitated through a process called demat. This allows for easier and more efficient handling of securities, as they are held in electronic form in a demat account. Conversely, if someone holding securities in dematerialized form wishes to have physical certificates, they can request the conversion.

Explanation:

Explanation:

HUF accounts cannot be opened with joint holders.

Explanation:

An investor wishing to avail depository services must first open an account with a depository participant registered with a depository.

Explanation:

A DP may also choose to terminate its participation in the depository by giving a notice of not less than 30 days.

On receipt of such notice, the depository may cease to provide any service or act for the DP. The depository should notify the DP, other participants, clients of the surrendering DP and SEBI within seven days of this action.

Explanation:

In NSDL, a pledgor (borrower) can substitute the securities offered in a pledge transaction, if the pledgee (lender) agrees to it.

Explanation:

As per CDSL Operating instructions, nominee’s photograph, signature, or in case of minor, the guardian’s signature are not required.

(The photograph of the Nominee is annexed to the nomination form in case of NSDL.)

Explanation:

FIIs and NRIs are not excluded from this requirement and they too have to give the PAN no.

Explanation:

AML procedures should include inter alia, the following three specific parameters which are related to the overall ‘Client Due Diligence Process’:

a. Policy for acceptance of clients b. Procedure for identifying the clients c. Transaction monitoring and reporting especially Suspicious Transactions Reporting (STR).

Explanation:

The DP can close a client’s account if the client has defaulted in performing its obligations laid out in the client-participant agreement.

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.

Explanation:

During the ‘shut period’ applicable to Government securities, RBI will not register transfer of securities during this period.

Therefore, dematerialization requests entertained during shut period may take long time to get confirmed.

Explanation:

A Depository (Not Depository Participant) must have a minimum net worth of Rs. 100 crore.

Explanation:

DP cannot obtain a Power of Attorney (POA) from its client(s) as a requirement for opening a demat account – its upto the client to decide.

Explanation:

In a pledge transaction, the borrower is called the PLEDGOR and the lender is called the PLEDGEE.

Explanation:

Explanation:

The DP should stamp it – “Surrendered for Dematerialization”

Explanation:

Explanation:

A clearing member can give an instruction to move securities from one settlement to another settlement which is called ‘inter-settlement’ transfer.

Explanation:

Persons belonging to one of the following categories are eligible to become a DP:

1. A public financial institution as defined in section 4A of the Companies Act.
2. A bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934.
3. A foreign bank operating in India with approval of the Reserve Bank of India.
4. A State Financial Corporation established under the provisions of section 3 of the State Financial Corporations Act, 1951.
5. An institution engaged in providing financial services, promoted jointly or severally by any of the institutions mentioned in the four above-mentioned clauses.
6. A custodian of securities who has been granted a certificate of registration by SEBI.
7. A clearing corporation or a clearing house of a stock exchange.
8. A stockbroker who has been granted a certificate of registration by SEBI.
9. A non-banking finance company.
10. An R&T Agent who has been granted a certificate of registration by SEBI.

Explanation:

An Illiterate person can open a demat account by putting his thumb impression on the agreement as well as on the account opening form.

All accounts opened by illiterate person(s) with NSDL DPs must be either introduced by an existing account holder or must be attested by applicant’s bank.

Explanation:

1. Request from Depository or client (in case of NSDL): If a Depository Participant (DP) or client submits a request to the Depository, particularly in the case of the National Securities Depository Limited (NSDL) system, it can result in the account being frozen.
2. Written instruction from client to DP for freezing the account: When a client directly provides a written instruction to their Depository Participant (DP), asking for the freezing of their account, it can lead to the account being frozen.
3. Orders from Government, SEBI, court, tribunal, or statutory authority: If the DP or the depository receives orders from governmental bodies (such as the Central or State Government), regulatory agencies (like SEBI), court mandates, tribunal rulings, or any other statutory authority instructing the freezing of an account, the account can be frozen.

Explanation:

A depository account may be opened and maintained in the names of more than one person.

All the joint-holders have to sign the application form and acknowledge receipt of copy of the Rights and Obligations document. The supporting documents and photograph should also be provided for all joint holders.

Explanation:

Explanation:

The opening of clearing member account constitutes a “standing instruction” to receive credits from the clearing corporation when there is a pay-out.

Explanation:

On allotment, the Issuer / its R&T agent provides the details of successful allottees to the depository and the execution date when the securities should be credited to the beneficial owners accounts.

Explanation:

The clearing members and custodians shall pay to the Clearing Agency whatever is due to them for settlement of their cleared positions.

In turn, the Clearing Agency shall pay to the clearing members and Custodians moneys payable to them for every settlement for their cleared positions.

Explanation:

When fake or stolen shares are submitted for dematerialisation, the R&T agent will retain the shares and inform the DP accordingly.

Explanation:

As per the rules, the books that shall be maintained by a broker include, register of transactions (sauda book), clients ledger, general ledger, journal, cash book, bank book, securities register, counterfoils or duplicates of contract notes, margin deposit book, register of accounts of sub-brokers, KYC, agreements with clients and tripartite agreements with client and sub-brokers

Explanation:

In case where a state or the central government is the issuer, the depository reconciles the records of the dematerialized securities with the statement provided by the RBI on a monthly basis.

This means that the reconciliation process, which involves comparing and adjusting records, is performed on a monthly schedule.

Explanation:

One of the important roles of a securities market is to provide a channel for the allocation of savings to investors. In securities markets, individuals can invest their savings in various financial instruments such as stocks, bonds, and other securities, allowing for the efficient allocation of funds in the economy.

Explanation:

In case of death of one of the Clients in a joint account, the surviving Client(s) shall request the DP to transmit the balances lying in the Client account to the account of the surviving Client(s).

Explanation:

The client must submit the delivery instruction slip to its DP before the DPs acceptance deadline.

Explanation:

The transaction statements can be provided electronically, provided an agreement in the prescribed format has been executed with the clients for this and adequate security measures have been taken.

SEBI allows the DP’s to provide transaction statements and other documents under Digital Signature, as governed under Information Technology Act, 2000

Explanation:

When a rematerialisation request is sent, the securities in the client account will not be available for delivery/transfer immediately.

The client will have to wait for physical certificates to reach him before they can be sold. Thus the client would encounter temporary illiquidity on the securities requested for in rematerialised form.

Explanation:

Its under SECTION 12 of the Depositories Act.

Explanation:

Explanation:

On allotment, the Issuer / its R&T agent provides the details of successful allottees who have opted for receiving securities in demat form, to the depository and the execution date when the securities should be credited to the beneficial owners accounts.

The depository will credit the securities to the allottee accounts on the execution date and the Issuer / its R&T agent inform the investors of the credit of securities in the electronic form by sending the allotment advice.

Explanation:

Any trade that is cleared and settled without the participation of a clearing corporation is called off-market trade.

Large deals between institution, trades among private parties, transfer of securities between a client and a sub-broker, large trades in debt instruments are normally settled through off-market route.

Explanation:

In Derivatives trading, there is no delivery of securities involved. So there is no off market transfer of securities.

Explanation:

Cash corporate actions involve distribution of monetary benefits, e.g., dividend and interest etc.

Non-cash corporate actions involve distribution of benefits other than cash such as bonus issues, offer of shares on right basis, conversion of securities, etc.

Explanation:

Explanation:

Explanation:

PMLA which means Prevention of Money Laundering Act 2002 – As per this act the intermediaries have to maintain records of transactions like –

– All cash transactions of the value of more than Rs 10 lakhs or its equivalent in foreign currency.
– All series of cash transactions integrally connected to each other which have been valued below Rs 10 lakhs or its equivalent in foreign currency where such series of transactions take place within one calendar month.
– All suspicious transactions whether or not made in cash.

Explanation:

The instructions are executed on the execution date. If there is adequate balance in the account, such quantity will be debited on the execution date. If adequate balances do not exist in the account, then instruction will wait for adequate balances till the end of the execution day.

In cases where adequate balances are not received till the end of the day of the execution date, the instruction will fail.

Explanation:

Invocation Request Form (IRF)

Explanation:

If the lender (pledgee) has unilateral right to appropriate the securities to his account and if the borrower (pledgor) defaults or otherwise, the transaction is called a pledge.

If the lender needs concurrence of the borrower (pledgor) for appropriating securities to his account, the transaction is called hypothecation.

Explanation:

Nomination can be made by individuals holding beneficiary owner accounts on their own behalf singly or jointly.