NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository
Mr. Raman Iyer holds shares in demat form and wants to understand what a depository actually does with his securities. Which statement best describes the depository's role?
A depository holds securities in electronic form and enables their ownership transfer through book entries. It does not issue new shares, guarantee market prices or control investment choices; those functions belong to issuers, markets and investors respectively.
- AIt holds securities in electronic form and facilitates their transfer through book entriesCorrect
- BIt issues fresh shares to the public on behalf of the company
- CIt guarantees the market price of the securities held in the account
- DIt decides which securities an investor may buy or sell
Explanation
A depository is an organisation that holds investors' securities in electronic form and enables transfer by book entry. It does not issue shares, guarantee prices or restrict investor choices. Issuing shares is the company's function, and price guarantees are not offered by any depository.
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