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

A clearing member's pool account holds shares after pay-out. If the shares are not transferred to the client and remain unallocated, which statement best reflects the applicable rule?

Pool account is only a temporary settlement account, so securities must be moved to the clients' demat accounts within the prescribed time. Brokers cannot hold client securities there indefinitely, and the depository does not sell them automatically or send them to the protection fund.

  1. AThe broker may keep them indefinitely as its own holding
  2. BThe depository will sell them automatically after one month
  3. CThe shares are to be transferred to the respective client accounts within the prescribed time, and the pool account must not be used to hold client securities for longCorrect
  4. DThe clearing corporation will transfer them to the investor protection fund immediately

Explanation

The pool account is only a transit account used for settlement. Securities must be passed to the client accounts within the prescribed time and cannot be retained there. The depository does not auto-sell, and the broker has no right to retain them.

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