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

A depository participant wishes to close its business and surrender its registration with the depository. Which statement is correct about its obligations towards its clients?

A depository participant exiting the business must ensure that clients' accounts are transferred to another DP or closed under the depository's prescribed procedure, with proper notice. Holdings are never deleted or moved to the DP's own account, since they belong to the beneficial owners.

  1. AIt may simply close and clients' holdings are automatically deleted
  2. BIt must ensure clients' accounts are transferred or closed as per the depository's procedure before ceasing operationsCorrect
  3. CIt need only inform the stock exchange
  4. DIt may transfer clients' securities to its own proprietary account

Explanation

Investor holdings belong to beneficial owners and cannot vanish or be moved to the DP's own account. The DP must follow the depository's exit process, which protects clients by transferring or closing accounts with notice. Informing only an exchange is insufficient.

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