NISM Certifications · NISM-Series-VI: Depository Operations
Functions of Depository Participant: Account Operations Explained
A Depository Participant (DP) is the agent of the depository that opens and runs demat accounts for investors. Account operations cover opening, joint and minor accounts, changes, closure, delivery instructions, dematerialisation, pledge, freeze and statements. For the exam, learn who may do what, with which document, and the exact process steps.
What this chapter covers
This chapter covers the daily work of a DP. It starts with the types of demat accounts and how you open one. It then moves to who can operate joint and minor accounts, how details are changed, and how an account is closed.
The second half covers what happens inside an account. You will study delivery instructions and transfers, dematerialisation and rematerialisation, corporate actions, and then pledge, hypothecation, freeze and statements. Each is a process with set steps, forms and checks.
This chapter connects to the rest of the paper. Earlier chapters explain what a depository, a DP and a BO are. Later chapters on operational aspects, risk and investor protection assume you know these account functions. If you know this chapter well, the other chapters become easier.
NISM-Series-VI has 100 questions, a pass mark of 60% and a 25% negative mark on wrong answers. Account operations questions are process-based and factual, so they are among the easiest marks to secure if you learn the rules exactly. They also punish guessing, because options often differ by one condition, such as who signs, who may instruct, or what a freeze blocks. Time spent here lets you answer with confidence instead of guessing.
Functions of Depository Participant - Account Operations: topics in the order to study them
- 1Types of Demat Accounts and Account OpeningEverything else depends on knowing who the account holder is and what the account types are, so start here.
- 2Operation of Joint Holder and Minor AccountsIt builds on account opening and tests who is allowed to operate and sign.
- 3Modification and Closure of Demat AccountsOnce you know how accounts are opened and held, changes and closure are easy to place.
- 4Transactions: Delivery Instructions and TransfersThis is the core daily activity of an account and needs the account basics in place first.
- 5Dematerialisation, Rematerialisation and Corporate ActionsThese are special flows that add or remove securities, so learn them after normal transfers.
- 6Pledge, Hypothecation, Freeze and StatementsThese restrict or report on holdings, so they make most sense last, after you know how holdings move.
How to prepare Functions of Depository Participant - Account Operations
Treat this chapter as a set of processes. For each one, know the steps, the form or instruction, who acts, and the limits.
- Read each topic once in the study order and write the flow of each process in your own words, in 4 to 6 lines.
- For every process, list who can initiate it, who must sign, and what the DP checks before acting.
- Make a comparison list for look-alike terms: pledge and hypothecation, freeze and suspension, dematerialisation and rematerialisation.
- Solve MCQs topic by topic and note why each wrong option is wrong. Most traps change one condition.
- Re-read the workbook text for any point you got wrong, and check the exact wording rather than relying on memory.
- In the last two days, do mixed question sets under time and treat each wrong answer as a cost of 25% of its marks.
- Finish with the quick revision points and your own error list.
Common mistakes in Functions of Depository Participant - Account Operations
Mixing up pledge and hypothecation.
Fix: Learn how each is created and recorded in the depository system and what changes in the account, then compare them side by side.
Assuming any joint holder can operate the account alone.
Fix: Go by the operating instructions given at opening and the rules for who signs, as stated in the workbook.
Treating a minor account like any other account.
Fix: Remember who is the holder, who operates, and what changes when the minor becomes a major.
Confusing the roles of the BO, DP and depository in a process.
Fix: For each step, write the actor next to it: BO instructs, DP verifies and executes, depository records.
Mixing up what a freeze blocks.
Fix: Learn that a freeze can apply to debits, credits or both, and at account or ISIN level, and answer based on the stated type.
Guessing on process questions.
Fix: Skip if you cannot narrow to one option, since a wrong answer costs 25% of the question's marks.
Last-day revision: Functions of Depository Participant - Account Operations
- 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.
Functions of Depository Participant - Account Operations practice questions
- A DP receives a DIS from a BO for an off-market transfer. Which check should the DP carry out before processing the instruction?
- Ms. Kavita Rao holds shares in her demat account and wants to prevent any debit from the account for some time, while still allowing credits…
- A BO wants to prevent any debit from his demat account but still allow credits of securities such as bonus shares. What should he request hi…
- Mr. Reddy wants to receive periodic statements of his demat account. What is the standard requirement regarding the transaction statement fr…
- Mr. Iyer, a BO, informs his DP that his Delivery Instruction Slip booklet has been lost. What should the DP do on receipt of this request?
- Which of the following is a statement of account that a DP must provide to a BO at the prescribed frequency, showing the holdings and transa…
- Ms. Rao lost her unused delivery instruction slip (DIS) booklet. What is the most appropriate action to protect her account?
- A BO wishes to change the address recorded in his demat account. Which approach is most consistent with DP procedures?
Functions of Depository Participant - Account Operations in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Functions of Depository Participant - Account Operations: frequently asked questions
What is a Depository Participant?
A DP is an agent of the depository through which investors access depository services. It opens demat accounts and carries out instructions for the account holder. Banks, brokers and other institutions can act as DPs once registered.
Which topics in this chapter should I learn first?
Start with types of demat accounts and account opening, then joint and minor accounts. These set up the roles and terms used in the later processes, such as transfers, pledge and freeze.
Is this chapter mostly theory or process?
It is mostly process. Questions ask who does what, in what order and with which document, so learn the steps and conditions rather than long definitions.
Does NISM-Series-VI have negative marking?
Yes. A wrong answer costs 25% of the marks assigned to that question. The pass mark is 60%, so avoid blind guesses and attempt only when you can remove at least some options.