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NISM Certifications · NISM-Series-VI: Depository Operations · Foreign Portfolio Investors (FPI)

A custodian-DP is opening a demat account for a newly registered FPI. Which statement about the FPI's securities holding is correct?

The FPI must hold its securities only in dematerialised form. It opens a demat account with a depository participant, usually a custodian, and the securities are held in the FPI's own name rather than the custodian's or a broker's.

  1. AThe FPI must hold securities only in dematerialised formCorrect
  2. BThe FPI may hold shares in physical form for listed companies
  3. CThe FPI must hold securities in the name of its custodian
  4. DThe FPI can hold securities only through a stock broker's account

Explanation

FPIs are required to hold and transact in securities in dematerialised form through a demat account with a depository participant. Securities are held in the FPI's own name, not the custodian's. Physical holding for listed shares is not permitted for FPIs in the secondary market.

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