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

After a client's demat request is confirmed by the issuer, what happens to the securities in the depository system?

The issuer cancels the physical certificates and records the depository as the registered owner in its books, while the investor's demat account is credited and the investor becomes the beneficial owner. The DP does not hold ownership, and no certificates are returned.

  1. AThe physical certificates are returned to the client as a record
  2. BThe issuer cancels the certificates and the depository's name appears as registered owner, with the client's account credited as beneficial ownerCorrect
  3. CThe securities are held in the DP's own name as the registered owner
  4. DThe client becomes registered owner and the depository holds no entry

Explanation

On confirmation, the issuer cancels the certificates and substitutes the depository's name as registered owner in the register of members. The depository then credits the investor's account as beneficial owner through the DP. The DP never becomes the owner and certificates are not returned.

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