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NISM Certifications · NISM-Series-VI: Depository Operations · Foreign Portfolio Investors (FPI)

An FPI's custodian asks the DP about the settlement of the FPI's trades in the secondary market. Which statement is correct?

An FPI's trades are confirmed and settled through its appointed domestic custodian. FPIs trade on exchanges and may sell their securities, but the custodian handles trade confirmation and settlement, so settling without a custodian is not the correct procedure.

  1. AFPIs may deliver shares only through off-market transfers, never on exchanges
  2. BFPI trades are settled through the custodian, which confirms the trades for the FPICorrect
  3. CFPIs must settle trades through a clearing member without any custodian
  4. DFPIs cannot sell securities once purchased until maturity of registration

Explanation

FPIs are required to appoint a domestic custodian, who confirms and settles the FPI's trades. The other options misstate the rules, since FPIs trade on exchanges and can sell freely.

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