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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

A mutual fund buys shares through a broker. Which market participant holds the fund's securities in safe custody and handles settlement of those trades on the fund's behalf, rather than the broker?

A custodian holds the fund's securities in safe custody and settles the trades the broker executes for it. Institutional clients use custodians to confirm trades and arrange delivery and payment, whereas merchant bankers and debenture trustees serve issue management and debenture-holder protection.

  1. ACustodianCorrect
  2. BMerchant banker
  3. CDebenture trustee
  4. DStock exchange investor protection fund

Explanation

Institutional investors such as mutual funds use custodians to hold securities and to settle trades executed by brokers. The custodian confirms trade details and arranges delivery or payment. A merchant banker manages issues and a debenture trustee protects debenture holders. The investor protection fund compensates investors in broker defaults.

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