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

Mr. Vikram Shah holds a demat account with a DP. Which statement about his legal position as a Beneficial Owner (BO) is correct?

The depository appears as the registered owner in the issuer's books, but Mr. Shah is the beneficial owner with all rights to dividends, bonus and voting. The DP is merely an agent, so it does not gain ownership of the securities held in demat.

  1. AThe depository is the registered owner in the issuer's records, while Mr. Shah is the beneficial owner entitled to the rights and benefits of the securitiesCorrect
  2. BMr. Shah is the registered owner and the depository is the beneficial owner
  3. CThe DP becomes the beneficial owner of his securities while they are held in demat
  4. DNeither the depository nor Mr. Shah has any ownership rights over the securities

Explanation

In a depository system, ownership is split: the depository is the registered owner on the issuer's books, but it holds no beneficial interest. The investor, as BO, retains all rights such as dividends, bonus and voting. The DP is only an agent.

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