Skip to content

NISM Certifications · NISM-Series-VI: Depository Operations · Depository and its Business Partners

A depository participant is a subsidiary of a bank. Under the depository framework, which of the following is correct about the maintenance of the DP's clients' securities and its own?

The DP must keep its own holdings separate from clients' holdings and must not use client securities for its own purposes or borrowings. Beneficial owners own the securities, so segregation protects them, even if the DP is a bank subsidiary.

  1. AClient and own holdings must be kept in separate accounts, with client assets not used for the DP's own purposesCorrect
  2. BOwn and client holdings may be pooled in one account for convenience
  3. CClient securities may be used by the DP as collateral for its borrowing
  4. DOnly the depository can open accounts in the DP's own name

Explanation

A DP must segregate its own holdings from clients' holdings, and client securities belong to the beneficial owners. Pooling or using them for the DP's borrowing would breach this. DPs can hold their own accounts as BOs, but separately.

Did you get it right without looking?

One question tells you little. A timed set on Depository and its Business Partners shows your real accuracy, how long you take and where you lose marks.

Practise Depository and its Business PartnersFree diagnostic mock

More Depository and its Business Partners questions