NISM Certifications · NISM-Series-VI: Depository Operations
Functions of Depository Participant: Transmission and Nomination
Transmission is the passing of securities in a demat account to survivors or legal heirs when a holder dies, by operation of law and not by a sale or gift. Nomination is a facility where an individual holder names who receives the securities after death. Learn the claimant, documents, and nomination rules.
What this chapter covers
This chapter covers what a Depository Participant (DP) does when a demat account holder dies. It has two linked parts. Transmission is how securities move to surviving joint holders or legal heirs. Nomination is the advance instruction a holder can give about who receives the securities.
The chapter builds on your earlier work on account opening, holders, joint accounts and the DP-client relationship. You need to know who can hold an account, and who signs, to understand who can nominate and who can claim. It also links to transfer of securities, where the key contrast is that transfer happens by act of the parties, while transmission happens by operation of law.
Questions are usually direct. Expect definitions, who can do what, which document is needed, and what happens to a nomination in a given situation. The wording matters, so read each rule carefully.
This chapter is compact and rule-based, which makes it easy to score if you learn the exact conditions. Questions test definitions and procedure, and there is little calculation. Because NISM Series VI carries negative marking of 25% of the marks for a question, a half-remembered rule can cost you more than a blank answer. Clear concepts here also help you in other DP-function chapters on account operations and investor protection.
Functions of Depository Participant - Transmission and Nomination: topics in the order to study them
- 1Transmission of Securities in Demat AccountsStart with the core idea, transmission versus transfer, and who can claim in single and joint accounts.
- 2Transmission Procedure and Documents RequiredOnce the concept is clear, learn the steps the DP follows and the papers a claimant must give.
- 3Nomination Facility for Demat AccountsNomination is the advance alternative to transmission, so study it after you know how transmission works.
- 4Changing, Cancelling and Effect of NominationThis is the most detailed part, so study it last, when you already know who can nominate and when the nominee's rights arise.
How to prepare Functions of Depository Participant - Transmission and Nomination
Treat this chapter as a set of rules and exceptions. Aim to explain each rule in your own words, then test it against trap options.
- Write one line defining transmission and one defining transfer. Note the difference: operation of law versus act of parties.
- Make a table in your notes (for yourself) of account types: single holder, joint holders, minor and non-individual. Next to each, write who gets the securities on death.
- List the transmission steps in order: claimant request, documents, DP verification, then credit to the claimant's account. Note which documents the workbook names.
- Learn nomination as a checklist: who can nominate, who can be nominated, how many nominees, and who signs the form. Use the workbook for exact conditions.
- Study the effect of nomination: when the nominee's rights begin, and what changing, cancelling or a new nomination does to an earlier one.
- Solve practice MCQs on the chapter, and for each wrong answer note the exact condition you missed.
- Revise the rule list the day before the exam and again just before the test.
Common mistakes in Functions of Depository Participant - Transmission and Nomination
Treating transmission and transfer as the same thing.
Fix: Link transmission to operation of law (death, for instance) and transfer to the will of the holder (sale, gift).
Assuming the nominee gets rights while the holder is alive.
Fix: Remember that a nominee has rights only after the death of the holder, or all joint holders, in a joint account.
Giving the nominee's rights in a joint account after the first holder dies.
Fix: For joint accounts, ask first who survives. The nominee matters only once all holders have died.
Mixing up who can nominate.
Fix: Keep a short list of eligible and ineligible account types, taken from the workbook, and revise it.
Believing an old nomination survives a new one.
Fix: Learn that a later valid nomination changes or replaces the earlier one, and that cancellation removes it.
Memorising document lists without understanding the process.
Fix: Learn the order of the process, then attach each document to its purpose, such as proof of death and proof of the claimant's identity.
Last-day revision: Functions of Depository Participant - Transmission and Nomination
- Transmission is the passing of securities by operation of law, on death of a holder, for example.
- Transfer happens by an act of the parties, such as a sale or gift. Do not confuse the two.
- In a joint account, on the death of a holder, securities go to the surviving holder or holders.
- A claimant applies to the DP, and the DP verifies the documents before crediting securities.
- A death certificate is a core document for transmission after a holder's death.
- SEBI prescribes simplified documentation for lower-value holdings. Check the workbook for the exact limit.
- Nomination is available to individual holders. Non-individual account holders cannot nominate.
- Nomination gives the nominee rights only after the death of the holder, or of all joint holders.
- A nomination can be changed or cancelled by the holder at any time.
- A fresh nomination replaces the earlier nomination.
- Nomination is not the same as a will. Know how the two differ and how the workbook treats nominees.
- Read each MCQ for conditions such as single versus joint, and minor versus adult.
Functions of Depository Participant - Transmission and Nomination practice questions
- A demat account is held jointly by A (first holder), B and C. A dies. How does the DP deal with the account under the transmission process?
- Mr. Iyer, the sole holder of a demat account, has died. His son wishes to get the securities moved into his own demat account. What is this …
- Which of the following statements about nomination in a demat account is correct?
- Mr. Sharma, the sole holder of a demat account with a nominee registered, passes away. The nominee, Ms. Sharma, approaches the Depository Pa…
- A demat account is held jointly by A (first holder), B and C. A dies. How is transmission usually handled by the DP?
- Mr. Rao, a minor's guardian, holds a demat account in the minor's name. The minor becomes a major. Which statement is correct about the acco…
- Mr. Iyer held a joint demat account with his wife and son in the order Iyer, wife, son. Mr. Iyer dies. Who is treated as the first holder af…
- A demat account is held jointly by Anil (first holder) and Bina (second holder). Anil dies. Which statement correctly describes the DP's tre…
Functions of Depository Participant - Transmission and Nomination: frequently asked questions
What is transmission in a demat account?
It is the passing of securities to the survivors or legal heirs when a holder dies. It happens by operation of law, not by the holder's own act. The DP processes the claim after checking the documents.
How is nomination different from transmission?
Nomination is an instruction given by the holder in advance, naming who receives the securities after death. Transmission is the actual process of moving the securities to the person entitled. A nominee can use transmission to claim the securities.
Can a holder change or cancel a nomination?
Yes. The holder can change or cancel a nomination at any time by following the DP's prescribed process. A later valid nomination replaces the earlier one.
Do I need to memorise exact limits for this chapter?
Learn any limits and document lists exactly as given in the current NISM workbook, because SEBI rules are updated from time to time. Questions often test one precise condition. Revise from the latest workbook edition.