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NISM Certifications · NISM-Series-VI: Depository Operations · Investor Services (NISM VI)

Mr. Rao's DP failed to credit shares to his account on time after a valid demat request was processed, causing him loss. Which statement best reflects the depository framework on the DP's responsibility?

The DP is the depository's agent, and the depository is liable to the investor for the DP's negligence under the regulations, with recourse against the DP. It is wrong to say the depository bears no responsibility or that the investor must absorb the loss.

  1. AThe DP is the agent of the depository and is responsible for its own acts and omissions, and the depository can be liable to the investor for the DP's negligence under the regulationsCorrect
  2. BThe depository is never responsible for any act of a DP
  3. COnly the issuer is liable for any DP delay
  4. DThe investor must bear the loss since the DP is a private entity

Explanation

Under the depository regime the DP acts as agent of the depository, and the regulations make the depository responsible to the investor for the DP's acts, with recourse against the DP. The other options deny any liability, which contradicts this framework.

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