NISM Certifications · NISM-Series-VI: Depository Operations

Functions of Depository Participant - Account Operations: formula sheet

Full chapter guide

Key formulas

BO account holder: Beneficial owner = investor; registered owner in issuer's books = depository; Do not confuse the two roles. The BO enjoys the benefits of ownership.
BSDA eligibility: BSDA is for individuals, singly or jointly (up to 2 holders); each holder must have only one demat account across all depositories, and that account is the BSDA; Check the current limit in your NISM workbook. BSDA is for small investors and limits the value of securities held. Companies and HUFs are not eligible.
BSDA holding limit: Value of securities in BSDA ≤ the limit set in the current SEBI circular (limits for debt and non-debt securities may differ); Do not memorise a figure from old material. Verify against your latest workbook edition, as SEBI has revised the limits. If the limit is crossed, the account is treated as a regular account and charges change.
BSDA joint holding: Joint BSDA: up to 2 holders; every holder must meet the conditions, so the BSDA must be each holder's only demat account across depositories; No joint holder may have another demat account in his or her own name. It is not enough for only the first holder to meet the conditions.
NRI account types: Repatriable: proceeds can go abroad | Non-repatriable: proceeds credited to NRI rupee account in India; The nature depends on how the investment is made and the bank account used.
Account opening documents: KYC + account opening form + DP-BO agreement + tariff sheet; The BO must be given a copy. Charges are set by the DP in its tariff sheet, subject to the regulations and the depository's rules.
Joint holders: Joint demat account: two or more holders; the account opening form usually has fields for up to three; Do not treat three as a regulatory limit. Names must be in the same order as in the securities; the first holder is the primary holder.
Minor account: Minor account = minor as sole holder + guardian operates; A minor cannot be a joint holder. The guardian signs and gives instructions.
Minor and nomination: Minor account: nomination is allowed; the guardian nominates on the minor's behalf; A minor's account can have a nominee.
HUF operation: HUF account: opened in HUF name, operated by Karta; HUF cannot hold a joint account with an individual, and it must be a sole holder account.
Corporate operation: Corporate account: board resolution + authorised signatories; Specimen signatures of the authorised persons are kept with the DP.
Minor turning major: On attaining 18: fresh KYC + fresh specimen signature + updated details (including bank details); Guardian authority ends. The account becomes a normal individual account, and the adult holder signs.
Nomination for individuals: Nomination: individuals (resident and NRI), sole or joint holders; minor accounts through the guardian; not HUF, corporates, trusts or similar non-individual holders; Joint holders nominate together; nominee gets securities after the death of all holders.
Who starts a modification: BO request in writing + proof → DP verifies → DP updates records; The DP never changes BO details on its own initiative.
Closure by the BO: BO submits closure request form → holdings cleared or transferred → dues settled → DP closes the account; The BO can close an account without giving reasons, but the account must first be free of holdings and blocks.
Closure of an account with balances: Transfer balances to another account (of the same BO) → then close; Securities cannot be left in a closed account.
Joint account closure: Closure request signed by all joint holders; One holder alone cannot close a joint account unless the operating instruction allows it.
Freeze versus closure: Freeze = restriction on the account; Closure = account ends; A frozen account still exists and can be unfrozen by the proper authority.
Change of details and proof: New address / bank / signature / PAN → supporting proof for the new detail; The request alone is not enough; the proof must match the change requested.
On-market transfer: Seller's account → clearing member pool account (pay-in); clearing corporation → buyer's side (pay-out); Linked to an exchange trade. Settled through the clearing corporation, not directly between the two investors. For pay-in, the seller gives a DIS or electronic instruction (or an authorisation) to move the shares to the clearing member's pool account.
Off-market transfer: Seller's BO account → receiving BO account, directly; Not linked to an exchange trade. Used for gifts, transfers between own accounts and private sales.
Pay-in vs pay-out: Pay-in = securities go in to the clearing system; Pay-out = securities come out to the buyer; Viewed from the seller, pay-in is the delivery. Viewed from the buyer, pay-out is the receipt.
Instruction authority: Only the BO instructs; the DP only executes after checks; The signatures required by the registered mode of operation must be on the DIS.
DIS key features: Pre-numbered, issued in a booklet by the DP, tied to the BO's account, signed by the BO; Alterations must be authenticated by the BO. The DP verifies the signature before executing.
DP checks before execution: Genuine slip + signature match + sufficient free balance + no freeze, pledge or lock-in + valid target account and ISIN; Fail any one check and the DP must not execute the instruction.
Demat flow: Investor → DP (DRF + certificates) → Depository + Issuer/RTA → confirmation → credit to account; Certificates go physically to the issuer/RTA. The request goes electronically through the depository. The DP defaces certificates before forwarding them.
Remat flow: Investor → DP (RRF) → Depository blocks balance → Issuer/RTA prints certificates → depository debits balance; Securities must be free of pledge or freeze. The balance is blocked while the request is pending.
Bonus shares: Bonus shares = Holding × (bonus shares ÷ shares held in the ratio); A 1:2 bonus means 1 new share for every 2 held. Total after bonus = holding + bonus shares.
Stock split: Shares after split = Holding × (old face value ÷ new face value); Face value falls and the number of shares rises. The total face value of your holding does not change.
Cash dividend: Dividend = Shares held on record date × dividend per share; Entitlement depends on the record-date holding, not on the date you bought. Paid to the bank account linked to the demat account.
Pledge parties: Pledgor = BO giving securities; Pledgee = lender receiving the security; Pledgor stays the owner and receives dividends, bonus and other benefits.
Pledge life cycle: Creation → Confirmation by pledgee → Closure (release) or Invocation (on default); Pledged securities stay blocked in the pledgor's account, so they cannot be transferred. On invocation after default, the pledgee can have the securities transferred to its account or sold to recover the dues.
Margin pledge chain: Client → Trading/Clearing Member → Clearing Corporation; The client pledges to the member, and the member re-pledges to the clearing corporation. The securities remain in the client's demat account. On invocation, they are sold or transferred under the rules to recover dues.
Freeze types: Debit freeze = no debits; Credit freeze = no credits; Total freeze = neither; A freeze can be on the whole account, an ISIN or a quantity. It is set at the BO's request or by order of a regulator or court. A total freeze blocks both debits and credits. The exact effect depends on the freeze type and who placed it.
Freeze vs lock-in: Freeze: until lifted; Lock-in: until release date; A lock-in applies to specific securities for a set period. It ends automatically on the release date.
Statements: Transactions in the period → transaction statement at least once a month; No transactions → holding statement at least once a year; The BO can also ask for statements on request. Check the workbook's latest figures, since rules get revised.

Quick revision

A DP acts as the agent of the depository and offers its services to investors.
The investor holding a demat account with a DP is called the Beneficial Owner (BO).
Know the account types: regular, joint, minor, and those held by corporates and others.
In a joint account, know who the first holder is and who must sign as per the operating instructions.
A minor account is operated by the guardian on the minor's behalf.
Changes to account details need a request with supporting proof, checked by the DP.
Closure is requested by the BO, and the DP must check that no holdings remain or are transferred.
Delivery instructions are given by the BO to the DP to move securities out of the account.
Dematerialisation converts physical securities to electronic form; rematerialisation converts back.
Pledge creates a lien on securities for a loan, while the BO remains the holder.
A freeze restricts debits, credits or both, depending on what is frozen.
The DP sends the BO transaction and holding statements at the prescribed intervals.

Common mistakes

Thinking a company or HUF can open a BSDA. Fix: Remember BSDA is for individuals (sole or joint holders, up to 2) where each holder has only one demat account in total, which is the BSDA, and who stay within the value limit.
Confusing the beneficial owner with the registered owner. Fix: The depository is the registered owner in the issuer's records. The investor is the beneficial owner.
Believing a minor can be one of the joint holders. Fix: Remember that a minor account is always in the minor's sole name with a guardian.
Believing a minor's account cannot have a nominee. Fix: A nomination can be made in a minor's account. The guardian makes it on the minor's behalf.
Thinking the DP can update BO details on its own when it learns of a change. Fix: Remember the BO starts every change with a written request and proof. The DP only verifies and updates.
Treating freeze and closure as the same thing. Fix: A freeze is a restriction and can be lifted. Closure ends the account permanently.
Treating pay-in and pay-out as the same thing. Fix: Pay-in is delivery by the seller into the clearing system. Pay-out is the securities coming out to the buyer.
Calling a gift transfer to a relative an on-market transfer. Fix: No exchange trade means off-market. A gift or transfer between your own accounts is off-market.
Thinking the investor sends the demat request to the depository or the issuer directly. Fix: The investor deals only with the DP. The DP routes the request to the depository and sends the certificates to the issuer/RTA.
Forgetting that the DP defaces the certificates by stamping "Surrendered for Dematerialisation". Fix: Link the DRF, the defacing stamp and the DRN. These three belong together at the DP stage.

Exam tips

Learn the BSDA conditions as a short list: individual, one account, holding limit, lower charges.
Check the current BSDA limit and charges in the latest workbook before the exam, as SEBI revises them.
For NRI questions, find the word 'proceeds' and decide where the money goes.
A wrong answer costs 25% of the marks assigned to the question. Guessing has positive expected value once your chance of being right is above 20%, so removing even one option helps. Skip only when you have no idea.
Watch for absolute words such as 'only', 'never' and 'any'. They often mark the wrong option.
Memorise the firm rules: a minor has a guardian who operates the account, the guardian can nominate for the minor, a minor cannot be a joint holder, HUF is operated by Karta.
Read the account type in the stem first. Most wrong options mix rules from two categories.
Watch for words such as only, always and never. They often signal a trap on nomination or operation.