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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A broker also wishes to provide depository participant services to its clients. Which statement is correct about this arrangement?

A broker must obtain separate SEBI registration as a depository participant, through a depository, to offer demat services. Its stockbroker registration does not cover DP activity, because holding and transferring securities in demat accounts is a distinct regulated function.

  1. AThe broker needs separate registration with SEBI as a depository participant, in addition to its broker registrationCorrect
  2. BNo separate registration is needed since broker registration covers DP activity
  3. COnly the exchange needs to approve it, not SEBI
  4. DThe broker can act as a DP only through its clients' bank accounts

Explanation

Acting as a depository participant is a distinct activity requiring its own SEBI registration, obtained via a depository. Broker registration alone does not authorise holding clients' securities in demat form, so the other options are wrong.

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