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NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Trading and Settlement

A broker's clearing member pool account holds 1,000 shares of a company after pay-out. The broker is meant to deliver 600 shares to Client A and 400 to Client B but, by mistake, instructs the DP only for Client A and 600 shares. Which statement is correct?

The 400 shares remain in the broker's pool account until the broker gives a further transfer instruction, and the broker is responsible for the delay. Pool balances do not move automatically and the depository does not choose recipients.

  1. AClient B's shares automatically move to Client B's account after the end of the day
  2. BClient B has no right to the shares because the broker's pool account is a common account
  3. CThe remaining 400 shares stay in the pool account until the broker gives a further instruction, and the broker is responsible for the delayCorrect
  4. DThe depository transfers the 400 shares to the client with the lowest account number

Explanation

Pool account balances move only on the clearing member's instruction. The 400 shares remain in the pool account until a fresh instruction is given, and the broker is accountable for timely pay-out to the client. There is no automatic transfer, and the depository does not choose recipients.

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