NISM Series VI: Depository Operations Certification Mock Test (Set 4)

Explanation:

All FIIs, Sub Accounts & QFIs are deemed to be Foreign Portfolio Investors from June 1, 2014.

Explanation:

A DP, while conducting any business with a client, acts as an agent of the depository and is liable to the clients for all the acts and deeds performed by it.

Explanation:

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

1. A public financial institution as defined in section 2(72) of the Companies Act 2013.

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 etc.

Explanation:

As per SEBI rules : DPs who maintain electronic records should ensure the integrity of the data processing systems. All necessary precautions should be taken to ensure that the records are not lost, destroyed or tampered with. In the event of loss or destruction, sufficient back-up of records should be taken and made available at all times at a different place.

Explanation:

The word `transmission’ means devolution (transfer) of title to shares, for example, devolution by death, lunacy, bankruptcy, winding-up (in case of corporate) etc.

Explanation:

Corporate actions affect the holder of the securities. Thus, whenever any corporate action takes place it is necessary to determine the eligible Beneficial Owner’s (BOs) as of a particular date who are entitled to the corporate benefits. The issuer thus announces a cut-off date to determine the BOs of the securities as of that date.

This date is referred to as the `Record Date’ and depository system provides holding report i.e. list of BOs having holdings in the ISIN of the issuer as of end of the day of record date.

Explanation:

On receipt of a Remat Request Form (RRF) from the client, the DP forwards it to the Issuer or its R&T Agent. The Issuer/R&T Agent, after validating the RRF, confirms to the depository electronically that the RRF has been accepted.

Thereafter, the Issuer/R&T Agent despatches the security certificates arising out of the rematerialisation request within a period of 30 days from receipt of such RRF directly to the client.

Explanation:

By freezing an account for debits only (preventing transfer of securities in / out of the account), the client can receive securities in his account.

The client can receive securities but cannot transfer out the securities from his demat account.

Explanation:

The procedure for dematerialisation of CD is same as that carried out for equity shares. The client will submit a request to the DP, in the DRF (Dematerialisation request form), along with the original CD certificate/s to be dematerialised.

The DP would give an acknowledgement (DRF acknowledgement portion) to its client confirming the acceptance of the CD for dematerialisation.

Explanation:

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.

Explanation:

A beneficiary account holder is legally entitled for all rights and liabilities attached to the securities held in that account. Therefore, the account is called “Beneficial Owner Account”.

Explanation:

The applicant should have a minimum net worth of Rupees 3 crore (for NSDL). The net worth is to be calculated as per the method of computation prescribed by the respective depository. The stock broker DP should have a minimum networth of Rs. 2 crores (for CDSL).

Explanation:

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

A HNI cannot become a DP.

Explanation:

Pledgor gives a Pledge Closure request to his DP.

Explanation:

In India, the Securities and Exchange Board India (SEBI) has delegated the assigning of ISIN of various securities to National Securities Depository Limited (NSDL).

(Allotment of ISIN for G-sec is done by Reserve Bank of India)

Explanation:

In the depository system, each security is identified by a number which is known as the International Securities Identification Number (ISIN).

Explanation:

Usually its the Pledgor who request the closure of pledge, but 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:

To receive the securities in electronic form, investor must open a demat account through any DP with any
depository before making an application. For this purpose, the application form should have provision for investors to furnish their demat account number along with the following information:
– Depository Name
– DP’s Name
– DP-lD
– Beneficiary Account Number (BO ID)

Explanation:

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

Explanation:

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. In the above question, Mr. Soham held the securities in demat form, so he will receive the new shares in demat form.

Explanation:

I. Passport
II. Voter ID card
III. Driving license
IV. PAN card with photograph
V. Identity card/document with applicant’s photo, issued by
a) Central/State Government and its Departments,
b) Statutory/Regulatory Authorities,
c) Public Sector Undertakings,
d) Scheduled Commercial Banks,
e) Public Financial Institutions,
f) Colleges affiliated to Universities (this can be treated as valid only till the
time the applicant is a student),
g) Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their
Members; and
h) Credit cards/Debit cards issued by Banks.

Explanation:

For all public issues in demat form, the company has to enter into an agreement with ALL the depositories.

Explanation:

The Securities and Exchange Board of India (SEBI) Act was enacted in the year 1992. The options provided (1982, 1991, and 1985) are incorrect. The SEBI Act of 1992 established the Securities and Exchange Board of India as the regulatory authority for the securities market in India, granting it powers to protect the interests of investors and promote the development of, and regulate, the securities market.

Explanation:

DP can offer depository related services only after obtaining a certificate of registration from SEBI.

Explanation:

While opening a demat account, utility bills can be given as a ‘Proof of address’ as under :

Utility bills like – (Not more than 3 months old– as on date of receipt for documents).

i. Telephone Bill (only land line) ii. Electricity bill or iii. Gas bill

Explanation:

All debt securities which are available for demat are given ISIN code.

Explanation:

An active secondary market promotes the growth of the primary market and capital formation, since the investors in the primary market are assured of a continuous market where they have an option to liquidate their investments.

Explanation:

Pledgor Beneficiary Owner (BO) also has the facility to setup the pledge request even in case of insufficient / nil balance in the Pledgor BO account. The Pledgor BO shall have the facility to set up pledge request with future date as execution date.

Explanation:

Ownership of the pledged/hypothecated securities remains with the pledgor (borrower) until the pledge is invoked. Hence, all corporate benefits – cash and non-cash will accrue to the borrower.

Explanation:

All the members of a stock exchange ie. the Stock Brokers are clearing members.

Also Custodians who have been permitted by the stock exchange can act as a clearing member.

Explanation:

When there is an objection from any member of the Hindu Undivided Family (HUF), the transmission of securities held in the beneficial owner account should be effected only on the basis of a Decree by a competent Court or the Deed of Partition. This ensures that the legal requirements and decisions related to the transmission are in line with court orders or the family’s agreement as documented in the Deed of Partition. It provides a legally recognized basis for the transmission process.

Explanation:

As per Eligibility Criteria for a Depository by SEBI – The combined holding of all persons resident outside India in the equity share capital cannot exceed 49 percent of its equity share capital.

Explanation:

The word `transmission’ means devolution (transfer) of title to securities, for example, in case of death of individual, lunacy, bankruptcy, winding-up (in case of corporate entity) etc.

The process of transmission through a depository is simplified and investor friendly and the legal heir to the title interacts only with one entity i.e., his Depository Participant.

Explanation:

Presently the depositories in India facilitate the distribution of non-cash corporate benefits only.
The Issuer/R&T Agent distributes dividend, interest or other monetary benefits directly to the eligible beneficial owners on the basis of the list provided by the depository.

Explanation:

If a person investing in an Initial Public Offering (IPO) provides their Demat Account number, DP-ID (Depository Participant Identification), DP name, and Depository name, the securities can be allotted in dematerialized (demat) form. This information ensures that the allotted securities are directly credited to the investor’s Demat Account, making the process electronic and convenient.

Explanation:

In case of Debits Only demat a/c freeze, the client can receive securities but cannot transfer out the securities from his demat account.

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.

Where the stock broker, however, has a minimum net worth of Rs. 10 crore, the limits on the aggregate value of the portfolio of securities of the beneficial owners held in dematerialized form in a depository through him, shall not be applicable.

Explanation:

The DP will fill the relevant portion viz., the authorisation portion of the request form.

Explanation:

An eligible investor is required to submit a specified form to the Depository Participant at the time of account opening or designating an existing demat account to avail of the benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS). This form helps in the identification and processing of the investor for the specific benefits provided under RGESS.

Explanation:

Services offered to Basic Services Demat Account Holders:

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:

Funds can be raised in the primary market from the domestic market as well as from international markets in the form of ADR’s, GDR’s etc.

Explanation:

The buyers and sellers of Commercial Papers are usually big Corporates and the pricing etc. will depend on the credit reputation of the company.

Explanation:

The Depositories Act, 1996 provides for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy and security.

This is done by (a) making securities freely transferable subject to certain exceptions; (b) dematerialization of the securities in the depository mode; and (c) providing for maintenance of ownership records in a book entry form.

Explanation:

The Client ID is a part of the Demat A/c no and needs to be filled up in the IPO Application form.

The shares allotted in the IPO will be directly credited to the Demat A/c.

Explanation:

In case the R&T Agent rejects any dematerialisation request, it has to electronically intimate the depository regarding such rejection within a period of 15 days.

After intimating such rejection to the depository, the Issuer or its R&T Agent returns the Demat Requisition Form along with the rejection reason and relevant security certificates.

Explanation:

A Pledgor is a person who needs a loan against the securities in his Demat account.

The pledgor submits the request form containing all details like the details of securities to be pledged, The DP verifies the form for completeness and validity and ensures that the securities to be pledged exist in the pledgor’s account.

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.

In the SGL-1 facility, the account is opened with the RBI directly. Only entities, which fulfill all the eligibility criteria prescribed by RBI, are permitted to open SGL-1 account.

Explanation:

The certificate of registration granted to a DP may be cancelled by SEBI if it is found that:

• it is guilty of fraud, or has been convicted of an offence involving moral turpitude or
• it has been guilty of repeated defaults specified for suspension of the registration.

Explanation:

Steps for Pledge closure procedure :

1.Pledgor repays the loan to Pledgee

2. Pledgor gives a Pledge Closure request to his DP

3. Pledgor’s DP forwards the request to Depository

4. The Depository forwards this request to Pledgee’s DP

5. The Pledgee’s DP confirms with the Pledgee with a Pledgee Closure Confirmation Form

6. This is intimated to Depository and the Pledgor’s DP

7. Pledgor’s DP intimates about this to the Pledgor.

Explanation: