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

Mr. Iyer's DP wants to close its operations as a participant and surrender its registration. Which statement about the DP's obligation to its existing clients is correct?

The DP must notify its clients and facilitate shifting their accounts to another DP so that holdings remain protected. It cannot sell securities, move them to its own account, or leave clients stranded, since securities belong to the beneficial owners.

  1. AThe DP must give clients notice and enable transfer of their accounts to another DP, without leaving holdings unattendedCorrect
  2. BThe DP can transfer the client securities to its own proprietary account
  3. CThe depository will automatically freeze all client accounts permanently
  4. DThe DP may close all client accounts and sell the holdings

Explanation

On cessation, a DP must protect client interests by informing them and allowing them to transfer their holdings to another DP. It cannot sell holdings or move them to its own account. Permanent freezing is not the process.

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