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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository

Mrs. Leela Menon wants to know why transfer of securities is faster in the depository system than in the physical system. Which feature is the primary reason?

Transfers are faster because ownership moves by debit and credit entries between demat accounts, removing share certificates, transfer deeds and manual registration. Neither the issuer's registration of each transfer nor SEBI approval of individual transfers is needed.

  1. AShare certificates are couriered through DPs
  2. BTransfer happens by debit and credit entries in accounts without physical share certificates or transfer deedsCorrect
  3. CThe issuer company registers every transfer before it takes effect
  4. DSEBI approves each transfer individually

Explanation

Under the Depositories Act, transfer of beneficial ownership occurs by book entry, debiting the seller's account and crediting the buyer's. No certificates or transfer deeds are needed, so there is no physical delay. Issuer registration and SEBI approval of each transfer are not required.

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