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

A DP wants to appoint a new Business Partner (agent) to carry out some front-office activities. Which statement about such an arrangement is correct?

The DP remains fully responsible for the acts of its business partner. Outsourcing front-office tasks does not shift liability to the partner or give it independent status. The partner works under the DP's control and cannot open accounts or settle transactions on its own authority.

  1. AThe DP remains responsible for the acts of the business partner, and the partner cannot open accounts independently of the DPCorrect
  2. BThe business partner becomes directly liable to the depository and the DP is relieved of responsibility
  3. CThe business partner can open demat accounts in its own name without any DP
  4. DThe business partner may authorise settlement of transactions on behalf of the depository

Explanation

A DP may outsource certain activities, but it stays fully responsible and accountable to the depository and investors for the acts of its agents. The agent has no independent status as a DP.

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