NISM Series VI: Depository Operations Certification Mock Test (Set 1) /50 NISM Series VI: Depository Operations Certification Mock Test (Set 1) 1 / 50 1. Why do Depository Participants (DPs) need to establish distinct accounts for their personal investments, ensuring that ___________? a) There are no mistakes in the Payin and Payout of securities b) There is no co-mingling of their assets with that of their clients c) The RBI rules are followed d) The settlement is done faster Explanation:DPs are required to open separate accounts, for their own investments, thereby keeping the `beneficial owner’ accounts separate. This is to ensure that there is no co-mingling of their assets with that of their clients. 2 / 50 2. In a pledge/hypothecation transaction, what is the term for the borrower, and what is the term for the lender? a) Pledgor, pledgee b) Debtor, creditor c) Investor, bank d) Pledgee , pledgor Explanation:In a pledge / hypothecation transaction, the borrower is called the PLEDGOR and the lender is called the PLEDGEE. 3 / 50 3. In the case of Government Securities, which entity reviews the transfer form, DRF-GS, and certificates? a) Issuing and Paying agent b) SEBI c) Depository participants d) Debiting and Paying Agent Explanation:The Depository participants scrutinizes the form of transfer, the DRF-GS and the certificates. 4 / 50 4. Which form must an investor complete to convert electronic government securities into physical certificates? a) RGF-GS b) DRF-GS c) DGF-GS d) RRF-GS Explanation:An investor in government securities holding electronic balances in the depositories SGL-2 account can convert them into physical certificates or to book entry form by the process of rematerialisation.For this, an application has to be made to the depository, through the DP, in the Rematerialisation Request Form (RRF-GS). 5 / 50 5. Before launching a public offer, the issuer must enter into an agreement with all the ________. a) SEBI b) Depositories c) Depository Participants d) Investors Explanation:To encourage issue of securities in demat form, SEBI has stated that the issuer shall be required to enter into an agreement with all the depositories. 6 / 50 6. After receiving intimation and authorization from the issuer or R&T agent, who is responsible for making credit entries in the client’s account for a dematerialization request? a) Stock Broker b) Custodian c) Depository d) Clearing House Explanation:The Depository electronically intimates, on a daily basis, all dematerialisation requests to the respective Issuer or its R&T Agent. The Issuer or its R&T Agent have to verify the validity of the security certificates.After such verification, the Issuer or its R&T Agent intimates the depository and authorizes an electronic credit for that security in favour of the Client. On receipt of such intimation, the depository makes the credit entries in the account of the Client concerned. 7 / 50 7. Is the statement “The Depository also serves as an RTA agent for G-Secs” true or false? a) False b) True Explanation:The depository acts as a R&T Agent and discharges RTA functions for G-Secs (Government Securities). 8 / 50 8. After the fulfillment of the underlying agreement, who is eligible to request the closure of a pledge? a) Depository b) The Pledgor c) Depository Participant d) The Pledgee Explanation:The Pledgor (borrower) can request for un-pledging / closure of pledge/hypothecation after the performance of the underlying agreement. 9 / 50 9. When processing a pledge request for securities, the Depository Participant should verify that _________. a) Pledgor DP and Pledgee DP each shall create at least two users to implement the Maker-Checker feature b) The instruction form is submitted in duplicate. c) Both of the above d) None of the above Explanation:While processing a pledge/hypothecation request, the DP should take care with regard to the following steps/points:1. Ensure that the instruction form is submitted in duplicate. 2. Pledgor DP and Pledgee DP each shall create at least two users to implement the Maker-checker feature. 3. Ensure that all compulsory fields in the instruction form are entered. 4. Ensure that request for confirmation of pledge is given before the closure date mentioned in the instruction form (not applicable in case of NSDL) 10 / 50 10. In a Clearing Member Account, where are the securities consistently held? a) They are kept in Day and Date wise buckets b) They are kept in Date Wise buckets c) They are kept in a bucket of specific market type and settlement number d) They are kept in the custody of the compliance officer Explanation:In a clearing member account, the securities are always kept in a bucket of specific market type and settlement number. The clearing member may have to move securities from one bucket with a different market type-settlement number combination to another bucket from where pay-in is to be effected. 11 / 50 11. A Depository has to address an investor grievance within how many months? a) 6 b) 3 c) 2 d) 1 Explanation:The entity is required to redress the grievance within 30 days, failing which the complaint shall be registered in ‘SCORES’ – SEBI Complaints Redress System 12 / 50 12. In case of the account holder’s demise, the securities held in the account may be _______ to the nominee’s account once the DP verifies the nominee’s identity. a) Passed b) Transferred c) Transmitted d) Transposed Explanation:Transmission of shares occurs when the shares of a deceased share holder are inherited or bequeathed to an heir or personal representative of the deceased shareholder. 13 / 50 13. True or False: In NSDL, if an existing client introduces a new client to the DP, the existing client (introducer) is required to sign the application form. a) False b) True Explanation:NSDL – Details of introducer – If an existing client has introduced a new client to the DP his signature is required on the form. In other cases, the DP may ask for details that he considers appropriate. For example, the DP may require the application form to be attested by the bankers, or employer of the client. 14 / 50 14. Determine whether the following statement is true or false: Corporate actions are events that impact only the rights, obligations, and/or interests of the beneficial owners of securities held in a depository. a) True b) False Explanation:Corporate actions are events, which affect the rights, obligations and/or interests of the beneficial owners of the securities held in a depository. The most common examples are payment of interest, dividend, bonus shares, rights, splits, merger, redemption, payment of call money, liquidation etc. 15 / 50 15. What are the eligibility conditions for opening a Basic Services Demat Account (BSDA)? a) Only one demat account of first holder across depository b) Value of securities held in demat account not exceeding Rs. 2 lakhs c) Demat accounts registered for SMART facility d) All of the above Explanation:Individuals shall be eligible to opt for BSDA subject to the following conditions:a. Demat accounts under individual category andb. Value of securities held in demat account not exceeding Rs. 2 lakhs andc. Deamt accounts registered for SMART facility andd. One demat account of first holder across depository where verified PAN of the first holder is available. This criteria has not been applied in case of PAN exempt entities. 16 / 50 16. The Designated Depository Participant (DDP) and the ______ of the Foreign Portfolio Investor (FPI) shall be the same entity. a) Banker b) Custodian of the Securities c) R&T Agents d) Stock Broker Explanation:Each FPI shall engage a DDP before making investment in Indian securities market. At all times the DDP and the Custodian of Securities (Custodian) of the FPI shall be the same entity. 17 / 50 17. True or False: The depository’s G-Sec cell declines dematerialization requests when the RBI rejects the transfer due to signature mismatch or if the signatories are not registered with RBI. a) False b) True Explanation:Objections for demat of Government Securities : The depository acts as a R&T Agent and discharges RTA functions for G-Secs.The depository’s G-Sec cell rejects the dematerialisation requests in case RBI rejects the transfer on account of signature mismatch or in case the signatories are not registered with RBI. In such cases, the DP intimates the client of rejection by letter/fax along with the rejection memo sent by the depository’s G-Sec cell. 18 / 50 18. True or False: Issuers are obligated to open distinct redemption accounts for all the Certificates of Deposits they issue. a) True b) False Explanation:The redemption account opened by the Issuer will be the same for all the Certificate of Deposits – CDs issued by the Issuer. 19 / 50 19. True or False: For Government Securities, clients can submit a single DRF-GS and Form of Transfer in the case of different Loan Codes. a) True b) False Explanation:The DP captures the demat request for the G-sec if the ISIN already exists in the depository system. If the ISIN for that specific G-Sec has not been activated, the DP informs the G-Sec cell of the depository by faxing a standard letter along with a photocopy of the certificate or the SGL credit advice. Based on this communication, ISIN is generated and activated in the depository system. The DP ensures that in case of different Loan Codes the Clients submit separate DRF-GS and Form of Transfer. 20 / 50 20. What does ‘inter-depository transfer’ mean? a) Transfer of securities from an account in one depository to an account in another depository b) Transfer of securities from one broker to an account with another broker c) Transfer of securities from an account in one segment to an account in another segment d) Transfer of securities from an account in one settlement to an account in another settlement Explanation:Transfer of securities from an account in one depository to an account in another depository is termed as an Inter-Depository Transfer. 21 / 50 21. While SEBI has the authority to register and regulate all market intermediaries, does it lack the power to penalize them for violations of the provisions of the Act? a) True b) False Explanation:SEBI has the authority to penalise them in case of violations of the provisions of the Act. 22 / 50 22. Is it true or false that the name of the account holder in a demat account can be changed after the account’s opening? a) True b) False Explanation:Change in name can effected for –1.On account of marriage/ on account of Divorce2. On account of reasons other than marriage3. Change in father’s name 23 / 50 23. The operation of a demat account in the company’s name is permissible by individuals authorized by the board of directors, and this information should be conveyed to the DP through a formal letter. a) True b) False Explanation:A demat account in the name of a company should be operated by the person(s) authorized by a resolution passed by its board of directors. A simple letter is not sufficient. 24 / 50 24. Put option in a debt instrument, means the Issuer has an option of repaying the debt raised through the instrument at a time earlier than the final redemption date. a) True b) False Explanation:Call option, means the Issuer has an option of repaying the debt raised through the instrument at a time earlier than the final redemption date.Put option, means investor has an option of demanding repayment on the debt instrument at a time earlier than the final redemption date 25 / 50 25. For dematerialized securities, all the rights, duties, and liabilities associated with the security are vested in the depository. a) True b) False Explanation:All the rights, duties and liabilities underlying the security belong to the beneficial owner. 26 / 50 26. Is it true or false that only a guardian can establish a depository account for a minor? a) True b) False Explanation:A minor may hold shares through his guardian. Accordingly, a minor may open a depository account only through his guardian. 27 / 50 27. The sponsors of the intended depository must submit an application to the RBI for a certificate of registration in the specified format. a) True b) False Explanation:The sponsors of the proposed depository should apply to SEBI for a certificate of registration in the prescribed form. 28 / 50 28. The ______________ are capital market intermediaries which provide important infrastructure services to both the primary and secondary markets. a) Registrars and Transfer Agents b) Custodians c) Depositories d) All of the above Explanation:Custodians, Registrars and Transfer Agents (RTAs), and Depositories are all capital market intermediaries that provide essential infrastructure services to both the primary and secondary markets. Custodians safeguard securities, RTAs manage investor records and facilitate transfers, while Depositories enable electronic holding and transfer of securities. Together, they contribute to the efficiency and security of the capital markets. 29 / 50 29. A demat account can have maximum ________ joint holders. a) Two b) Three c) Four d) Any number of Explanation:The correct answer is three. A demat account can have a maximum of three joint holders. This means that up to three individuals can jointly hold a demat account, sharing the rights and responsibilities associated with the account. 30 / 50 30. In the scenario of a Joint Demat Account, dividend and interest warrants, annual reports, and notices for meetings are issued __________. a) Physically b) In the name of first two holders c) Only in the name of first named holder d) In the names of all account holders in the same order Explanation:In case of Joint Demat Account, though the beneficial ownership of jointly held securities vests in all joint holders, communications about the joint depository account are provided only to the first holder. The dividend and interest warrants, annual reports and notices for meetings are also issued to the first-named joint holder only. 31 / 50 31. In the depository environment, the securities transition via _________. a) Securities transfer b) Money transfer c) BO transfer d) Account transfer Explanation:In the depository environment, the securities move through account transfer. Once the trade is executed by the broker, the seller either gives an onmarket delivery instruction to his DP to transfer securities to his broker’s account or on behalf of his broker gives normal pay-in or early pay-in delivery instruction to his DP. 32 / 50 32. Can ABC Ltd., which is launching an IPO of Rs 12 crores, provide its subscribers with the option to receive shares in either physical or demat form as per their preference? Respond with Yes or No. a) Yes b) No Explanation:According to the Companies Act, 1956 (section 68B) every listed public company, making an initial offer of any security of Rs.10 crore and above has to issue it only in dematerialized form in accordance with Depositories Act, 1996. 33 / 50 33. To register as a DP, the application should be submitted _________. a) Directly to SEBI and a copy should be sent to Depository for information only b) To Depository who will in evaluate and register the DP c) Separately to Depository and SEBI d) To Depository, who will in turn forward it to SEBI after evaluation Explanation:An entity desirous of becoming a DP of a depository should make an application to SEBI. 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. 34 / 50 34. True or False: Upon dematerialization, do shares lose their identification features such as share certificate number, distinctive numbers, and folio numbers? a) True b) False Explanation:In the depository system, the securities in dematerialised form are not identified by distinctive numbers and certificate numbers as in the physical environment. Thus all securities in the same class are identical with each other and are interchangeable. For example, all equity shares in the class of fully paid up shares are interchangeable.This feature is known as Fungibility. 35 / 50 35. Is it mandatory, according to the SEBI (Depositories and Participants) Regulations, 2018, for a security to be accessible for dematerialization on both depositories? Respond with Yes or No. a) Yes b) No Explanation:A security can be availabe for demat on only one Depositiry. There is no legal rule binding an issuer to make its security availabe for demat on both the depositories CDSL / NSDL. 36 / 50 36. True or False: If the borrower rejects the Invocation of Hypothecation, will the securities persist as pledged balances in the borrower’s account? a) True b) False Explanation:In case of rejection by the borrower, the securities will continue to remain as pledged balances in the borrower’s account and the reasons for rejection are displayed in DP system of the lender’s DP. 37 / 50 37. The request for dematerialization of Government Securities must be submitted in __________. a) A letter of approval b) A letter of consent c) A letter of interest d) Demat Requisition Form Explanation:The client has to submit a request to the DP in the DRF for G-Secs (DRF-GS) 38 / 50 38. Can Custodians act as clearing members if they are permitted by the Exchange ? a) Yes b) No Explanation:There are two types of clearing members:– All the members of a stock exchange are clearing members; and– Custodians who have been permitted by the stock exchange to act as a clearing member. 39 / 50 39. Is it true or false that the name of the beneficial owner in the account can be changed even after the account has been opened? a) True b) False Explanation:In case a Participant commits a typographical error while entering name of the Client in the system (which is noticed after activation of the account) or while processing the request for change in the name, it may be corrected by the Participant. 40 / 50 40. Who can make a request for demat of the security? a) Registered holder of the security b) Company c) Depository Participant d) Depository Explanation:The registered holder of the securities should make the Dematerialisation Request. 41 / 50 41. The nomination or substitution will be considered invalid if the information provided in the nomination forms does not correspond with the records held by the Participant. a) True b) False Explanation:The Client(s) may make a nomination of his/their account in favour of any person by filing with the relevant Participant.A nomination, substitution shall be valid only if:• It is submitted to the Participant by the rightful Client(s).The nomination form has to be signed by all holders. A POA holder cannot nominate.• It is in the prescribed format (format is given by the depository to the participant).• It is duly signed by Client(s).• It is properly signed and witnessed.• Signature of the Client(s) tally with the specimen signature records.• The details of the securities entered in the nomination forms match those in the records of the Participant. CDSL Nomination form does not have provision for mentioning securities. Nomination is applicable to entire holding.• The photograph of the Nominee is annexed to the nomination form.• The nominee has signed the nomination form and guardian in case of the nominee being a minor. 42 / 50 42. If the pledgor defaults in discharging his obligation under the agreement, the pledgee _____________. a) Can complain in writing to the Depository b) Has limited options and cannot do much c) Can invoke the pledge d) Has to file a court case Explanation:If the pledgor defaults in discharging his obligation under the agreement, the pledgee may invoke the pledge/ hypothecation.This has to be done after taking the necessary steps under the terms of the agreement with the pledgor and as stated in the Bye-Laws of the depository and rules and regulations framed by SEBI. 43 / 50 43. When securities are submitted for dematerialization, the acknowledgment is provided by the __________ to the owner of the securities. a) Depository Participant b) Parent Company c) R & T Agent d) Depository Explanation:The DRF along with the securities is always submitted to the DP by the client. If DRF and accompanying certificates are found in order, the DP should accept the DRF and issue an acknowledgment to the client. 44 / 50 44. When the Clearing Corporation (CC) or Clearing House (CH) issues a payout, the securities are transferred _______. a) To the selling sub broker account b) To the buying broker account c) To the buying sub broker account d) To the selling broker account Explanation:The CC/CH gives pay-out and securities are transferred to the buying broker’s account. The broker then gives delivery instructions to his DP to transfer securities to the buyer’s account.If a broker gives pay-out breakup of his clients to CC/CH then pay-out securities are directly credited in the clients account by the CC/CH. 45 / 50 45. During the modification of Corporate Accounts by the DP, is it permissible to remove the name of an existing account holder and add new ones? a) True b) False Explanation:While carrying out the modifications, the name of any existing account holder of an account can neither be deleted nor can any new name can be added.DPs can only make changes to the name(s) of existing account holder(s) of the account. 46 / 50 46. The full form of CDSL is ________ . a) Central Depository Services (India) Limited b) Center for Depository Services (India) Ltd c) Commodity and Shares Ltd d) Common Depository Services Limited Explanation:The correct full form of CDSL is “Central Depository Services (India) Limited.” It is one of the two major depositories in India responsible for facilitating the electronic holding and transfer of securities. CDSL plays a crucial role in the dematerialization process, allowing investors to hold and transact in securities in a paperless and electronic format. 47 / 50 47. Of the below options, which persons/entities can register as a Depository Participant ? a) A foreign bank operating in India b) A Stock Broker c) A R & T agent d) All of the above Explanation:The foll entities can 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. 48 / 50 48. When an investor applies in an IPO and desires to receive the allotted securities in Demat form, what document does he need to fill? a) The DP _ID b) The Depository Name c) Depository Participant's name d) All of the Above Explanation:When an investor applies for an IPO and prefers to receive the allotted securities in Demat form, they need to fill in information related to the depository. This includes specifying the Depository Name, providing the DP (Depository Participant) ID, and mentioning the name of the Depository Participant. Therefore, the correct answer is “All of the Above.” This ensures that the investor’s Demat account details are accurately recorded, allowing for the seamless crediting of allotted securities in electronic form. 49 / 50 49. The Depository Participant has to reconcile its record with the Depository on a _________ basis. a) Every 12 hours b) Daily c) Every Wednesday and Saturday d) Weekly Explanation:The Depository Participant has to reconcile its records with its depository on a daily basis.The depository system has been formulated to do this reconciliation automatically every day at the end of the day. 50 / 50 50. Is it true or false that no foreign entity, acting as a sponsor, can possess more than 49% of the equity capital of the depository? a) True b) False Explanation:As per the SEBI Eligibility Criteria for a Depository – The combined holding of all persons resident outside India in the equity share capital cannot exceed 49 percent of its equity share capital. Your score is 0% Restart quiz Exit
