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

A client buys shares and the broker's pool account receives them on pay-out day. What must happen for the shares to appear in the client's demat account?

After pay-out, the shares sit in the broker's pool account, so the broker must instruct its DP to transfer them to the client's beneficial owner account. The exchange does not credit them directly, and dematerialisation or new certificates are not involved for shares already held in electronic form.

  1. AThe broker must give an instruction to transfer the shares from the pool account to the client's beneficial owner accountCorrect
  2. BThe exchange sends the shares directly to the client's bank account
  3. CThe client must apply for dematerialisation of the shares
  4. DThe issuing company must issue a new certificate to the client

Explanation

Pay-out credits the broker's pool account, not the client's account. The broker (clearing member) then gives a transfer instruction to its DP to credit the client's account. Dematerialisation applies only to physical certificates.

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