NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository
Ms. Kavita Rao holds shares in a company and wants to hold them in electronic form through a depository. Which statement best describes the role of a depository in this arrangement?
A depository holds investors' securities in electronic form and records transfers of ownership through book entries. It does not list securities, set prices, underwrite issues or execute trades; those functions belong to exchanges, the market and brokers.
- AIt holds securities of investors in electronic form and enables transfer through book entriesCorrect
- BIt lists the company's securities and fixes their price
- CIt underwrites the issue of securities of the company
- DIt acts as a trading member executing buy and sell orders
Explanation
A depository is an institution that holds securities in dematerialised form and effects transfer of ownership by book entry. Fixing prices is done by market forces, listing by exchanges, and order execution by brokers, so those options are wrong.
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