NISM Series VI: Depository Operations Certification Mock Test (Set 2)

Explanation:

The applicant shall be mandated to appoint a Compliance Officer, who would interact with the depository and on the DP’s behalf for compliance with the Bye-Laws and Business Rules and resolving investors/clients’ grievances.

Explanation:

A beneficial owner’s account is an ownership account. The holder/(s) of securities in this type of account owns the securities.

For example, Mr. Suresh who is a retail investor trades in the securities market. The securities which he buys or sells will be kept in his beneficial owner account which he would have to open with a DP.

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.

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:

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:

The Depositories Act, 1996, ushered in an era of efficient capital market infrastructure, improved investor protection, reduced risks and increased transparency of transactions in the securities market.

Explanation:

A holder of eligible securities in the depository system may get his physical holdings converted into electronic form by making a request through the DP with whom he holds a beneficiary account.

The request should be made in the prescribed Dematerialization Request Form.

Explanation:

Non-individuals including society, trust, body corporate, Hindu Undivided Family (HUF), holder of power of attorney cannot nominate.

Explanation:

A Depository Participant (DP) 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.

Explanation:

Allotment in electronic form is given only when the client name and the beneficiary account are matched with details filled in the application form.

Explanation:

Clearing Members and brokers have to open a beneficiary account if they have to deal with their own holdings.

Explanation:

The Depositories need to maintain the foll records for 10 years :

• Records of securities dematerialised and rematerialised.
• The names of the transferor, transferee, and the dates of transfer of securities.
• A register and an index of beneficial owners.
• Details of the holdings of the securities of beneficial owners as at the end of each day.
• Records of instructions received from, and sent to, participants, issuers, issuers’ agents and beneficial owners.
• Records of approval, notice, entry and cancellation of pledge or hypothecation.
• Details of participants.
• Details of securities declared to be eligible for dematerialisation in the depository.
• Such other records as may be specified by SEBI for carrying on the activities as a depository

Explanation:

A Client may withdraw its security balances with the Depository at any point of time by making an application for rematerialisation in to physical form to the Depository through its DP by submitting the Remat Request Form (RRF).

Explanation:

The DP should open a separate account in the name of each beneficial owner.

The securities of each BO should be segregated from the securities of other beneficial owners or
from the DP’s own securities.

Explanation:

Inter-Settlement Transfers – 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.

Explanation:

Once the Depository Participant finds everything in order and approves of the remat request, the R&T Agent issues security certificates.

Explanation:

Upon the death of the sole holder or the death of all the joint holders, as the case may be, the nominee shall request the DP in writing alongwith an original death certificate for transmitting the securities covered by the nomination to the account of the Nominee, held with any Depository, if the nominee has a demat account in individual capacity with another DP.

If the Nominee does not have an account with the Depository, the Nominee shall be required to open an account with any Depository.

Explanation:

Debt instruments can be classified into different categories like bonds, debentures, commercial paper, government securities, treasury bills, etc. and can be issued by Banks, Corporates, Government etc.

Government security means a security created and issued by the Central Government or a State
Government for the purpose of raising a public loan.

Explanation:

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

Explanation:

A CM is required to track the securities, which it has received for pay-in. A CM can obtain such information from the following sources:
(1) Its clients: CM may contact selling clients to inquire whether they have delivered securities.
(2) Its DP: CM may contact its DP to find out the deliveries received into its CM settlement account.
(3) Internet – using facilities provided by the depositories such as ‘IDeAS’ of NSDL and ‘easi’ and ‘easiest’ of CDSL

Explanation:

The creation of pledge and hypothecation against securities which are held in demat mode is permitted under the Depositories Act, 1996. (Not 1956)

Explanation:

There can be any number of pledge/hypothecation transactions between the same set of pledgees and pledgors.

Explanation:

Rematerialisation Request Form (RRF-GS).

Explanation:

The process of a broker submitting securities towards the securities sold by him on behalf of his client, to the clearing corporation of a stock exchange is called ‘PAY IN’.

Explanation:

The Companies (Amendment) Act, 1999 has introduced provisions for nomination regarding shares, debentures, fixed deposits, etc.

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).

There are two types of SGL facilities – SGL-1 and SGL-2.

Explanation:

As per the SEBI (Depositories & Participants) Regulations, 1996 the aggregate value of the securities of the beneficial owners, held in dematerialized form through a stockbroker DP, cannot be more than 100 times the net worth of the stockbroker.

Explanation:

The entire process of rematerialization typically takes a maximum of 30 days. During this period, the conversion of electronic securities (held in demat form) into physical certificates is completed.

Explanation:

Demat request form for dematerializing government securities is different and is called “DRF – GS”.

Explanation:

Nomination facility can be availed at the time of opening the depository account itself or subsequently also.

Nomination can also be changed at will by resubmitting the nomination details in the prescribed form.

Explanation:

Transmission means devolution of title to shares due to death, lunancy, bankruptcy, winding-up (in case of corporate) etc.

In case the shares are physically held, they will have to be sent to the Company / R & T agent along with the relevant documents for transmission.

Explanation:

At least Two Delivery Instruction Slips (DIS) shall be issued at the time of opening a BSDA.

Explanation:

Clearing member account is also popularly known as Broker settlement account’ or ‘Broker pool account’.

Explanation:

Under the Automatic Delivery Out system, the automatic generation of delivery-out instructions for moving securities from the CM Pool Account to the CM Delivery Account is applicable to both NSDL and CDSL depositories.

Explanation:

Any trade that is cleared and settled without the participation of a clearing member or clearing corporation is called off-market trade, i.e., transfer from one beneficiary account to another due to a trade between them.

Explanation:

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

In such cases, funds move from the buyer to the seller outside the depository system.

Explanation:

Under RGESS (Rajiv Gandhi Equity Savings Scheme), new retail investors are eligible for an additional tax benefit of up to Rs. 25,000 under Section 80CCG, subject to a maximum investment of Rs. 50,000 made in eligible securities.

Explanation:

Ownership of the pledged/hypothecated securities remains with the pledgor (borrower) until the pledge is invoked.

When ever securities are given as pledge (say for borrowing money), the ownership will remain with the pledgor – that is the person who has given the securities to borrow money. Only if the pledgor defaults and the pledge agreement is invoked, the ownership is transferred to the pledgee (lender) as per the terms.

Explanation:

For mailing/foreign address requirements, if the account holder is an FII (Foreign Institutional Investor) or an OCB (Overseas Corporate Body), SEBI/RBI registration details, along with an attested copy of the registration certificate issued by SEBI and an authorization letter, are required.

Explanation:

Securities to be dematerialized must be recognized by the depository, as eligible security. So only those securities whose ISIN (International Securities Identification Number) has been activated by the depository, can be dematerialised in the depository system.

Explanation:

The depositories G-Sec cell, on receipt of the RRF-GS, matches the Rematerialisation Request Number given on the RRF-GS with the electronic message received by the depository’s system linked to its shareholders system.

In case of a mismatch, the depositories G-Sec’s cell will send a letter to the DP intimating them of the mismatch. The DP has to resolve the mismatch.

Explanation:

Explanation:

After a Depository receives an application for registering as a DP (Depository Participant), it typically evaluates and forwards the application to SEBI (Securities and Exchange Board of India) within 45 days. This timeframe allows for the necessary assessment and processing of the application.

Explanation:

One annual physical statement of holding shall be sent to the stated address of the beneficial owner in respect of accounts with no transaction and nil balance even after the account has remained in such a state for one year.

Explanation:

For Pay in – Pay out of securities, 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:

Explanation:

The applicant should furnish information and details of its business history for a minimum period of THREE years or from the date of its inception, if less than three years.

Explanation:

As per the Depository Act rules, a company will have to issue securities in Demat form only if the issue size is above Rs 10 crores.

In the above example, the issue size is Rs 9 crore, so the company can issue securities in physical form. But the same cannot be sold as all trading on stock markets is done in Demat form only.

Explanation:

Explanation:

A Depository Participant may 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:

Remember – the certificate is valid for 5 years from the date of ISSUE and not application.

(A certificate of registration is valid unless it is suspended or cancelled by the Board. The DP, to keep the registration in force, shall pay registration fee for every five years from the sixth year.The specified fee shall be paid three months prior to the expiry of the block for which the fee has been paid)