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NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Account Opening

Ms. Meena is opening a demat account and wants to know what a Beneficial Owner (BO) is. Which description is correct?

A beneficial owner is the investor in whose name the demat account is held and who enjoys the benefits of the securities, while the depository appears as the registered owner in the issuer's records, so legal and beneficial ownership are separated.

  1. AThe person whose name appears in the DP's register as the legal owner of securities
  2. BThe person who holds the securities in the account of the depository as the legal owner
  3. CThe person who is the DP's authorised signatory
  4. DThe person in whose name the account is opened and who enjoys the benefits of ownership of the securities, while the depository is the registered ownerCorrect

Explanation

In a depository system, the depository is the registered owner in the issuer's books, and the investor is the beneficial owner entitled to the benefits such as dividends and bonus. The other options misstate who holds legal versus beneficial title.

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