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NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Account Operations

A DP receives a DIS for an off-market transfer, and the BO's account has a freeze on debits placed by the BO himself. What should the DP do with the instruction?

The DP should not execute the debit while the freeze is in force. The instruction can be processed only after the freeze is lifted through the prescribed procedure on the BO's request, because a debit freeze blocks every debit from the account.

  1. AExecute it, since the DIS is signed
  2. BExecute it after deleting the freeze without informing the BO
  3. CNot execute the debit unless the freeze is first lifted as per the prescribed procedureCorrect
  4. DTransfer the shares to the DP's own pool account

Explanation

A debit freeze prevents any debit from the account. The DP cannot process a transfer out until the freeze is removed through the proper procedure on the BO's request. Removing it silently or moving securities to a pool account would breach the BO's instruction and the rules.

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